5 Steps to Creating a Budget

By gathering information about your income and expenses, categorising your expenses, setting financial goals, determining your disposable income, and creating a budget plan, you can take control of your finances and achieve your financial goals.

Compare income and expenses
Make a list of all your average monthly outgoings then compare it to your current income. If there is money left over every month, then it’s easier for you to add this to your savings. If you earn less than you spend, ask yourself why you have been overspending. Do you spend when you are stressed or after payday? Do you spend more when mixing in certain social circles. Awareness is essential in forming new, healthy financial habits.

Set realistic goals
Short-term goals should take around one to three years to achieve and might include things like setting up an emergency savings fund or paying credit card debt. Long-term goals, such as saving for retirement or your child’s education, may take decades to reach. It’s important to allow yourself some fun – saving every last penny and never treating yourself will likely not be sustainable in the long term. It’s better to be consistent in your saving habits.

Follow the 50/30/20 rule
Once you’ve identified your monthly income and expenditures, it’s worth using the 50/30/20 rule – 50% of your budget covers any essentials like rent and bills, 30% covers variable costs like eating out and shopping and 20% covers savings and paying off debts.

Cut back on nice to haves
We are all guilty of enjoying the finer things in life, but identifying what nice to have items you can cut back on can help you achieve your financial goals quicker. You may be surprised by how much money you could accumulate by making minor adjustments. Common examples – eliminating the daily Starbucks or Costa coffees, limiting takeaways and getting rid of direct debits which you don’t need can make a huge difference over time.

Review your budget regularly
Once you have created your budget, don’t forget to review it from time to time. By checking it frequently, you’ll see whether you need to adjust your goals and where you could still cut back on your expenses.