No matter what stage you are at in life, you will find yourself needing to manage your money sensibly. Whether you’re off to university, or you’ve just moved house and have kids to think about as well as yourself, budgeting your income sensibly should become an immediate priority. Nobody likes realizing that they’re spending more money than they actually have, forcing them to invest in an emergency short term loan lender to get them back on their feet. With appropriate and efficient budget drafting though, there should be absolutely no problems at all, allowing you to live life without any financial stress.
Weigh Out Your General Input & Output Ratios
Drafting a budget is practically impossible if you don’t consider how much you’re earning and the reasons behind why you need to spend your earnings. You should definitely consider downloading an online banking app, as this way you can keep up to date with how much you’re earning and the amounts that you’re spending each month. Whilst bank statements are useful, they tend to get delivered once every three or so months, which might be too late. Therefore, always keep updated and note down all of your bank activity from how much you’re paid to how much you spend on household bills each month, as this way you can draft an efficient budget.
Take a Look at Common Spending Patterns
Feeding into the previous point, you need to monitor your frequent spending habits and how you’re going to tackle them. For example, you might realize that actually, you’re spending way too much on Gregg’s sausages rolls (I don’t blame you), and so you need to take action to prevent doing so. This could be completely stopping yourself from spending this extra money, or it could be drafting your budget with a little leeway to allow yourself to spend a bit of your income on personal goods. It’s always good to consider the latter, as cutting out personal spends completely could actually deteriorate your mental health. Only spending your money on expenses such as household bills and insurance can become emotionally draining – you need to treat yourself every once in a while!
Try a 50/20/30 Plan
Drafting a budget can be really complex, especially with so many differing expenses to consider. Elizabeth Warren has bared this in mind, and created the 50/20/30 template for us to follow when budgeting! Simply, 50% of income should go towards necessities such as utility bills and grocery shopping, 20% for long term savings such as pensions, and 30% for lifestyle choices. This plan is particularly useful for those of you who are new to the budget drafting process, as it gives you a guide to follow when trying to create the right spending proportions within your budget.
Go For a Test Run with Your Drafted Budget
Very rarely does anyone get their budget perfect the first time around, as it requires a lot of in depth planning. Sometimes, in order to efficiently draft your budget, you need to run a few trial and error attempts. Therefore, draft up a temporary budget and test it out for the week, as this way you can figure out what is working within your budget and what isn’t, allowing you to make any necessary changes. After many test runs, you should finally find yourself with the perfect drafted budget, allowing you to deal with life’s expenses efficiently and without stress.