If you’re responsible for providing for your family, it’s important that you are able to manage your income and expenditure effectively. Budgeting is an essential part of financial planning, as without it, you won’t know how much income you receive or what your outgoings are. It also helps you achieve your financial goals.
A budget is all about recording what comes in and out of the house, right? Wrong. Although that’s the initial phase, the most important part of effective budgeting is following through with the plans you’ve made.
For example, if you have stated that you are able to save £50 per month then actually saving that £50 rather than spending it is the hardest part. Sticking to the plans you’ve outlined with help you achieve your financial goals and in turn provide for the family so it’s important you stay on track.
If you establish that you’re overspending on entertainment or your debt repayments are wiping out your income and don’t do anything about it, budgeting is pointless. If you’re struggling to keep on top of your finances, Money Vista’s money management system can help.
Write down your goals
Everyone has financial goals of some sort, from being able to afford the new PlayStation, to planning for a dream wedding or even clearing debts. Whatever your aims and objectives, it’s important to know how much you need and the time frame if you have any hope of achieving them.
Track your spending
Although you can probably list your typical household expenses from memory, there’s the electricity bill, TV licence and so on, but what about those one-off bills? You still need to have the money to pay those, even if they’re only received once or twice a year. This could be car repairs, annual insurance premiums or school fees.
It’s also important to work out how much you spend on everyday things. It’s not just bills that come out of your monthly income – things like dining out, going to the cinema, getting the bus, filling up the car and even grabbing a morning coffee can take a huge chunk out of your income.
Identify your income
Let’s say your annual salary is £20,000 per year – you don’t actually get that in your pocket. Your income is subject to income tax, national insurance, pension contributions and student loan repayments and so on. It’s important to know exactly how much money you receive each month and that means taking all of these costs into consideration.
Implement the necessary changes
Effective budgeting requires implementation if you want any hope of providing for your family and ensuring that you’re on track to meet your financial goals. If you don’t have any disposable income, you will need to make changes in order to improve your financial outlook.