How to Make a Budget That Works

Following is a step-by-step guide to help you create a budget that will not only support your current lifestyle, but also set you on the right path financially

Make The Most of Budgeting Resources

Count yourself lucky, because most of us don’t even have to worry about the calculators and months’ worth of receipts anymore. In this day and age, we have access to a myriad of budgeting resources have been developed specifically to help make our lives easier. Apps you can download to help organise your budgeting include; Learnvest, Mint, HomeBudget with Sync, and Moneywiz. https://www.sorted.org.nz/a-z-guides/budgeting also has great information and resources for helping you organise your budget, including their Money Planner, a budget calculator tool.

Pinpoint Total Monthly Income

How much money do you have coming in? This will be easy to figure out if you have a regular fixed income, but if your pay can vary its best to create an estimate of the least amount you’d earn on average. This way you’re always prepared and can afford months you earn less, and any extra money you earn can be put straight to your goals so you can reach them faster. Don’t forget to include any additional income like part-time contracting or rental income in your money coming in. Starting your budget on a monthly basis is the best way to get an idea of money habits in the month, but if it suits your situation better you can make this on a weekly or fortnightly basis.

Identify and Deduct Expenses

Start with your essential fixed expenses such as mortgage or rent payments, utility bills and car repayments. Most of these expenses should be the same every month, so list them and begin deducting from your total monthly income. Some of your expenses will vary, so estimate an average per month cost and you can always adjust this as necessary. Once you have identified your essential expenses, you need to list your lifestyle expenses, such as gas, groceries and general spending money. At this point you can begin cutting anything unnecessary out, but remember you don’t want to make it too hard to begin with, so just cut out easy things like morning coffees you could make at work. It’s important not to jeopardise your lifestyle too much, it’s no fun that way and will be a lot harder to feel motivated about reaching your goals. It is also a good idea to streamline payment dates to work around your budget, so you can get everything paid once a month and whatever you have left after your expenses is either yours to play with, or disperse into savings accounts.

Break Your Goals Down

Whether you want to work towards buying your first home, a new car, or a month in Europe, you need to break it down and figure out how much it will cost you. Don’t feel like you are limited to one goal, but make sure it’s easy for you to measure your progress. Work with a deadline, if you are wanting your first home in the next five years, figure out how much you will need to save each month to get there. Then figure out how long you have until your ideal travelling time for Europe and divide the amount needed by the months remaining. Create a timeline so you can see your progress over time and this will show you how easy it is to get that savings snowball rolling.

Get Your Priorities in Order – Literally!

Make a list of expenses and figure out which should come first. This will depend on the type of expenses you have, for example if you have debt, it is a good idea to prioritise paying this off first. If you are hoping to travel in the near future, savings should be a priority and if you simply want to maintain a good credit score, bills such as credit card repayments should come first. You can always change this if it isn’t working but it will help you get an idea on where you want your money to go.

Be Your Own Critic

Look at your budget and make sure you’re covering everything. Don’t forget to budget for irregular expenses like car registration, birthday/Christmas presents and over time continue to identify and eliminate unnecessary expenses. Keep reviewing and updating your budget, for example if you have received a pay rise, put more of your money away into savings, and reach your goals faster. Remember to plan as your goals and life changes, and you will stay on top of your finances and make those financial goals a reality!