Here is some guidance around why budgeting is important and the process.
Budgeting helps you answer two key questions whether you spend more than you earn and what can you afford to spend.
Considerations before budgeting:
- Gather all your bank statements, household bills and receipts. Don’t be tempted to guess or estimate and try to gather at least 3 months work of paperwork so your budget can be accurate.
- Decide who you are budgeting for – are you just considering your personal finances or are you looking to budget for your family/partner too. It may be easier to budget together.
- Be as accurate as you can with your figures- Don’t underestimate your expenditure if you do need to guess it will be best to guess larger. Look out for overlaps in categories so you don’t include expenses twice.
- Separate spending and credit card paybacks- If you pay off your credit card in full then this should go in the spending section rather than in the credit card section.
- Check your pension details- If you contribute to your pension through personal finance hen put this in expenditures. However, if your pension contributions are already taken off your pay by your employer then they don’t need to be considered.
- Include one off spends as these affect your budget planning majorly, split the cost evenly over the year for one off spends like holidays or a new car.
Use this free budgeting tool to detail what you earn vs what you spend:
https://www.moneysavingexpert.com/banking/budget-planning/#spreadsheet
Step change also have a 3 step guide to building a budget which are working out your total income, making a list of everything you spend monthly, take away what you spend from your income to work out you have a budget surplus or deficit.
You can find out more about this here:
https://www.stepchange.org/debt-info/your-financial-situation/making-a-budget.aspx
