By Money Desk

Monday, April 2, 2018.

One of the first things that we are advised about when leaving the family home and stepping out to make a life for ourselves is the importance of living within our means. But the sheer number of people who do not live by a budget is absolutely astounding! A budget allows us to examine our personal finances, analysing what we have coming into the bank and how we should spend it (or perhaps more importantly, how we shouldn’t spend it). When people are unaware of how much they should outlay on certain aspects of their life or how they should divide the money that they have, they end up overspending. We are constantly tempted by loans and credit cards - we spend money that isn’t our own. This results in us sinking into debt, which comes hand in hand with anxiety and stress. So, in order to stay in the black and out of the red, it’s absolutely essential to budget. Here’s exactly how to go about it!

Working Out How Much You Have

The amount that we see written down as our “salary” isn’t necessarily the amount that we have to spend. Many people misjudge their income thanks to this simple mistake to make. In order to be fully aware of the amount you take home from your work, you need to work out your total income after tax. Work hand in hand with an accountant in order to be entirely sure of this.

Covering the Essentials

Once you know how much you have to work with, you need to cover the essentials. These are the things you couldn’t live without: shelter, food, water, and energy. A means of transport in order to get to and from work can also fall into this bracket.

Keeping Track of Your Spending

Once you’ve forked out for the essentials, you are left over with your disposable income! But it’s still a good idea to keep a track of your disposable income. Use a specialist app like everydollar. Take a look at others’ experience with it at everydollar review. This is a specialist budgeting tool that helps you to track your income and spending. You can see where your money really goes.

Saving

Remember that you don’t have to spend everything the moment that you have it. You should seriously consider keeping a little money saved aside for a rainy day. Regardless of how much disposable income you have to play with, it’s important that you practice self-control and restraint. Just because it’s there to be spent doesn’t mean that you have to spend it. Be sensible and think every purchase over before splurging cash! If you don’t absolutely need it, chances are that you can put the money away in a savings account instead and use it towards some kind of great life experience such as travel.

As you can see, there’s a whole lot to take into consideration when you start learning how to budget. But it’s an essential life skill that you really need to get to grips with. The sooner you incorporate budgeting into your day to day life, the less likely you are to experience debt!