A Budget is the quickest and simplest tool you can use to fix and control your household finances.
They say a goal without a plan is just a wish. The plan itself is a budget and failing to have a basic budget simply wishes away your money goals.
That house you want isn’t coming, the family holiday to Mexico, sorry not this year. Plans to celebrate your birthday at The Ivy, maybe Nando’s will do and the Rolex Daytona with the green dial….just keep reading mate.
In this post, we’ll break down what makes up a budget and why it’s important to track these individual numbers to get a true picture of where you are and where you want to go financially. The point of a budget is to help you set long-term financial goals to keep you from overspending, help shut down risky money habits, and so much more.
“Truthfully I used to think just like everyone else, what’s the point of writing down a budget?”
I know what I make every month and roughly what goes out. It was so upsetting to see how little I’d saved up. I’d spend and make it last to a few pounds just before payday. My money goals seemed like an unobtainable distant dream. I’d wait all year to see if I’d receive a pay rise or my bonus so that I could finally book a family holiday.
You could use a budget to see where you can save for future goals like planning a nice holiday or potentially purchasing a home for your family one day. Financial goals don’t need to be distant dreams, you can truly take ownership and control of every penny you earn and every penny spent.
We’ve done the hard work for you and created a free budgeting planner
It’s broken down into segments that include your income, expenses, total debt, savings and investments. It can highlight major issues that drain your income, savings and investments which could be a quick fix or something to be worked on in the long run.
Income 🤑
The income segment is the foundation, outlining the financial resources available to you or your household during a specific period. It’s usually the income from your job (daily, weekly, monthly) in most people’s cases.
This section provides an overview of all sources of income including side hustles, freelance work, part-time jobs, rental income, investment dividends to government benefit payouts. If you have a spouse or partner their income is also included here. One-time bonuses received during the budgeting period can be integrated into the budget or allocated for specific financial goals.
For individuals with variable income, such as freelancers or commission-based workers, it’s essential to estimate an average or base income. This helps in creating a budget that accommodates fluctuations in earnings.
Expenses 🫣
The expenses segment serves as a breakdown of your anticipated and actual expenses over a specified period, typically every month. This crucial part enables you to gain insight into your spending patterns, make informed decisions, and maintain financial stability. The expenses segment is broken down into various categories, each representing specific aspects of your financial lifestyle.
You’ll have fixed expenses including rent or mortgage payments, utilities, Nursery fees, mobile phone, insurance premiums, car finance, road tax, TV license and subscription services.
You’ll also have variable expenses that may include groceries, eating out, entertainment, shopping, kids activities, commuting, fuel, public transport, vehicle maintenance, personal grooming, toiletries, self-care items, sports, and hobbies. Monitoring and controlling your variable expenses is the key to budgeting discipline.
Regularly reviewing and adjusting the expenses segment is essential for financial success. This process allows you and your family to adapt to changes in income, expenses, and financial goals, ensuring that your budget remains effective.
Total Debt 🙄
This outlines all financial obligations and liabilities you may have. It includes various types of debts and other financial commitments that require regular payments.
All payments toward outstanding debts such as credit cards, student loans, personal loans, buy now pay later loans and other forms of debt even to family or friends. Keep track of these payments to help you manage and reduce your overall debt burden.
With a well-structured debt segment in your budget, you can gain better control over your financial situation, work towards becoming debt-free, and make informed decisions about your future financial well-being.
Savings & Investments 😁
A reflection of your commitment to financial stability and long-term growth. This segment involves the deliberate allocation of your money towards building a financial safety net and generating wealth over time.
Short-term goals such as saving for a friend’s wedding abroad, buying a new gadget, or taking the kids to Disneyland. It allows you to plan for and achieve smaller milestones without disrupting your overall financial stability.
Long-term saving goals focus on securing your future and achieving major life objectives. This may include saving for education (the kids want to go to uni), buying a home or even a holiday home.
Investing involves putting money into various financial instruments with the expectation of earning a return. This may include stocks, bonds, mutual funds, real estate, or other investment vehicles. The choice of investments depends on individual risk tolerance, financial goals, and time.
Emergency Fund 🫡
A major part of financial planning, the emergency fund is a dedicated pile of money set aside to cover unexpected expenses or financial setbacks. This fund provides a buffer against unforeseen circumstances such as home-related emergencies, car repairs, or sudden job loss.
Here’s your free budgeting template to get you started today!
Sinking Fund 😇
A strategic sector designed to cover anticipated future expenses or financial goals. Unlike traditional savings accounts a sinking fund is specifically designated for upcoming financial obligations like car insurance, council tax or summer holiday clubs.
To implement a sinking fund simply total up all the expenses that will go into this fund and divide it by 12 representing each month. Set up a standing order from your main bank account with this monthly figure to go to a different savings account noted sinking fund. Once the expense occurs use the funds to clear the balance in one payment.
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