If you are looking to create a budget then you need to know how much you are spending. This will allow you to judge the areas that you can cut back on and the essential areas that you must remember to budget for.
If you need to create a working budget, one that you can stick to and works, then understanding the money that you are currently spending, can give you some vital information for creating a realistic budget.
There is nothing worse than creating a budget to miss off the essential items that you need and then not have the money with which to pay for the items.
Track your spending
It is therefore important that before you create a budget you work out what areas you spend your income on, only then will you create a true working budget that will work.
It is difficult to track your spending habits; it is very easy to forget when you purchase an item on-line, or your morning coffee on the way to work. You need to find a system which works for you, whether you use cash or pay by debit card you need to write all this information down.
For me I always ask for a receipt and this helps me to remember the items that I have bought; it tracks the amount of money that I have spent and I just take these receipts away from the money I have left to make sure that I haven’t forgotten any purchases.
It is a way to make you think about your purchases as you go over your spending habits. It can make you question your diet, too. How often you purchase items that are snacks or fast food and you are not really looking at the amount of money it is costing you.
Once you have at least a week’s spending tracked you can make a prediction for the following week as to how much money that you are going to need and the areas the money will be spent. Continue to track your expenses, this is part of the learning curve, you are looking to become aware of the amount of money that you are spending without thinking. Just think of the options that you would have, just by putting half of the money that you spend on non-essential items away, you might be surprised how quickly it can build up.
If you are looking to create a budget that will work, then you need to come up with the right amount of money that you need to use each week; if you make this allowance too small, you might always feel unable to purchase any necessities. If you make it too large, there is the risk that you will spend too much; getting the balance right is important but not an easy task. The amounts might vary each month depending on circumstances like birthdays and holidays, especially if you have young children, who require some entertainment.
It is a difficult element of your budget to manage, but getting the amount wrong that you need each week could have disastrous effect on your budget surviving the month.