Every successful business has strong financial budget to predict income and set limits on spending, yet individuals and families are not as committed. Making a budget can be an easy step to take control of personal finances – however perceptions that that it is too difficult or time consuming to make and maintain a budget tend to turn some away!
Why make a budget?
Making a budget is important to identify your income sources and to determine how much you are spending on different expenses. Making a budget can help reduce debt, build savings or simply to work out where money is being spent. You can prioritise spending on needs rather than wants.
How do I make a budget?
Step 1 – Find a budget plan template
There are many budget plan template tools available on the internet that can be used on a computer or printed. Moneygeek.com.au has created a budget planner (Download – Money Geek Budget Planner Template 41Kb) available that can be downloaded here. Identify which items in the budget are relevant to your personal finances and add expenses that are not listed.
Step 2 – Preparation
For your budget to be useful, you need to be accurate in your figures so preparation is the key to success. Before you can make a budget you need to find your income and expenses. Using your budget plan template collate pay slips, bank statements and bills that are relevant. For expenses, try to obtain expenses over a longer period of time (i.e. over a quarter) so you can use a more realistic average.
Tip: Many banks now offer budget making tools as part of their online banking services. Using these tools can be an easy way to identify actual expenses over a period of time.
Step 3 – Fill in budget items
Complete the items in the budget planner starting with income and moving into the expenses. Try not to overstate income and use longer term averages for expenses for more realistic expenses. Any items that you have not completed any figures for, have a think and confirm that you do not spend in that area.
Step 4 – Check budget plan figures
Double check your budget plan figures! Do they seem correct; have you understated or grossly overstated any items?
Step 5 – Determine your budget position
Calculate if you have surplus income or you are in a negative budget position. Budget plan tools should calculate this automatically for you.
So you have made a budget – what now? Now that you have built an accurate budget, you need to identify issues within your budget that require attention. Budgeting is vital to building and maintaining wealth and although making a budget can assist you find what you can and can’t afford, keeping to your budget is the most difficult.
So you have made a budget.. What now??? Read more on tips for positive budgets, areas that can be improved for negative budgets and how to set limits and maintain a budget.
Have your own tips and ideas on creating a budget? Leave your comments, questions and tips below!
About the Author – The Money Geek
The Money Geek is the head money blogger for MoneyGeek.com.au. With over 8 years experience in the finance industry, the Money Geek provides information over a range of topics to help families Australia-wide improve their financial literacy to become their own geeks and take control of their financial future!