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Simple steps to learn how to budget moneyTo learn how to budget money, we need to go back to basics. It's not hard, but sorting out your finances takes time. You need to fully understand where you're spending your money, how much you're spending and how much money you're bringing in. Once you've got a grip on those three things, you can start to play with your budget to make life easier. This allows you take complete control over your spending and your future. This section is all about how to budget. You'll learn the simple steps in setting up a budget, understanding where your money goes and how to keep hold of it. For now, let's focus on where to start with the basics. Articles on how to budgetHow to budget money: part one How to budget money: part two Making a budget work for you Envelope budgeting Zero based budgeting made easy Teaching money to our kids Living on a student budget How to make a budget and stick to it How to create a budget for an event Setting up a budget - Things that easily get forgotten A simple budget as an example Budget variance - What to do about it How to budget: part oneTo learn how to budget money, we need to go back to basics. It’s not hard, but sorting out your finances takes time. You need to fully understand how much you’re spending and how much money you’re bringing in. This article is all about these basics and once you’ve completed the four steps, you’ll know how to budget money. The steps below are a basic outline of how you should start to budget. Within this site, there are many more in-depth articles on how to budget money and tools for budgeting, including sample budgets, budget worksheets and budgeting tips. For now, let's focus on where to start. Budgeting on a monthly basisMost people budget on a monthly basis because most of the major expenses such as mortgage or rent and other household bills occur on a monthly basis. This also ties in with salaries, however not everyone gets paid monthly. If you get paid weekly, multiply your weekly pay by 52 for the number of weeks in the year and then divide by 12 to get a monthly amount. Now, on to the four simple steps. Step 1: Work out your monthly incomeStart off by making a note of any income you receive within the month. You should include everything from your pay cheque to any benefits you receive - anything that comes into your bank account within the month. If you're not sure how much this is, then look at your old bank statements. You'll get a better idea of exactly how much comes in. Items you could include would be:
If your pay cheque changes each month, then just take an average amount. This can be done by adding several months together then dividing by the number of months. For example:
If you have two incomes within your household and you're doing a family household budget, then include both incomes in your monthly budget. Step 2: Work out all your expenses![]() When you learn how to budget money, it's really important to look at where your money is going. We all know that we have the mortgage or rent to pay, along with council tax, water, gas and electricity and phone bill. These are regular payments, but what about all the other things. I remember as a young girl going to town on a Saturday to go to the shops. I had a £30 allowance for the month (that shows my age) and would spend it on various bits and pieces. When I got home, I was always amazed to find that I didn't have much money left. I could never work out where or what I'd spent my money on. I'd just frittered it away. It's that sense of loss of money, which has always made me be very careful with my cash. I want to know where it's going and who is getting what! It's easy to forget where our money goes. A few pounds here, and a few pounds there, but it soon mounts up. A really great exercise is to write down everything you spend for a month. We're working with a monthly budget, so it's best to do the following exercise for a month. An exercise in budgeting: "Live and learn"The benefit of this exercise is that it will really show you where you spend your money. Take a pen and small pad and whenever you pay for something make a note of it. You've got to be honest with yourself, no cheating now. You should include everything from that coffee on the way to work to the can of Coke in the afternoon. Don't forget to include all the items for the kids too. This little exercise may seem like a pain, but it will really get you in the mood to learn how to budget money. When you see how much you spend and what you spend it on, you'll be inspired to cut back and start saving. Once you've completed a month of the live and learn exercise, you'll need to fill in a monthly budget. We'll show you how to do that too. Continue to part two on reviewing and revising your budget. See other articles in this section |
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