Budgeting is a crucially important skill for any person, whether you earn a salary or are self-employed. By drafting a sensible monthly budget and sticking to it, you’ll be able to enjoy your daily life while achieving the financial goals you’ve set for yourself in the long-run. Here is a quick guide to drawing up your personal monthly budget:
Crunch the Numbers
From a financial point of view, a good budget is one that produced a surplus. Once you have surplus cash at the end of each month, you can save and invest your money for whatever financial goals you have in mind.
Creating a surplus may sound easy enough, but deciding how much of a surplus you need is the tricky part. By calculating how much you spend each month (you can easily see this from your bank statements) and comparing this to your income, you’ll be able to see whether or not you have a surplus.
In general, you should be looking to save at least 10% of your monthly income after tax for retirement. If you’re renting your home, you should up this amount so that you have enough money for a sizable deposit if and when you decide to buy a property and any additional expenses like holidays or a deposit on a new car should also be paid for from your savings, not through loans.
Zoom in on Your Expenses
If your income stays constant most months, the best way to achieve your surplus is by adjusting your expenses. Look for ways of saving money that don’t have a negative impact on your quality of life, and you’ll be more likely to stick to your budget – nobody likes to be deprived.
Many people find ways of saving money by monitoring their expenses over a short period of time. Try to note each purchase you make for a week, and take a hard look at the numbers. You may be able to save money by making your own coffee instead of ordering a cappuccino from the coffee shop each morning, or adjust your menu at home according to what groceries are on special each week.
The number of ways you can save are almost endless, and you’ll end up with a healthy surplus each month that will allow you to achieve your financial goals.