How to create your first budget

Budgeting is easier than you might think if you just have the right information.

13:14 10 January 2014

If the word “budget” gives you a headache, you are certainly not alone. Thankfully budgeting does not actually need to be migraine-inducing and can actually save you from many stressful moments. Technology has improved the way we are able to create budgets, but if you prefer the tried-and-trusted pen and paper method that is fine too. 

 

Here are a few things you will need to know before you begin.

 

Your monthly earnings

It would be best to use your post-tax earnings since that is the amount you actually have to work with. It is always better to underestimate income and overestimate expenses. 

 

Expenses

It is fairly easy to remember monthly expenses such as electricity, groceries, or vehicle payments. Do not forget to take account of any payments which are automatically deducted from your pay. You should also calculate mailing expenses, clothing, medical and any other expenses. If they are not monthly. Take the amount you spend annually and divide by 12 months. Then make sure that you set aside those amounts so that you will be able to purchase them and it will not throw off your budgeting. 

 

Debts

It can sometimes be helpful to have a couple different categories for your debts. You can break them into short-term and long-term debts. This can be a good way to figure out which debts you might be able to pay off quickly.

 

Assets

While you do not necessarily need to have all your assets in order to do a budget, it can help you figure out what types of funds you have working in your favour. 

 

Once you have the necessary parts of your income and spending listed, you will be able to take a look at what might be necessary and what is not necessary. It is a lot easier to decide how you can reduce expenses to create a better cash flow.