Creating Your First Personal Budget

Budgeting is about as fun as … It carries connotations of endless maths and complicated spreadsheets. However getting to grips with even the basics of personal budgeting will set you on a future to financial stability and ultimately – freedom.

It is also really not that complicated, promise! And with new apps and purpose built software to help you automate 95% of the process it’s quick and easy too – so no excuses.

The essence of budgeting is to ensure that you’re not living “outside of your means”, or in normal speak – not spending more money than you make. Once you’ve got that bit down, you can move on to saving goals and forecasting spend (I can tell you’re excited already).

We’ve created a workbook which will take you through the steps below to help you understand your finances as of right now and will get you into healthy financial habits.

The Personal Budgeting How To Guide

1) Write down how much money you make each month

Regardless of whether you get paid weekly, monthly or ad hoc, work out and write down your expected or average monthly income. Most big expenses (e.g. rent) are usually paid out on a monthly basis so it makes sense from a budgeting perspective to map both your income and expenditure in this way.

2) Write down any known fixed monthly expenditure items

These should be all of the predictable and known outgoings you have every month. These will likely include rent or mortgage payments, household bills, travel costs to work, phone bills, gym memberships, Netflix and Amazon prime subscriptions etc. Anything that you pay out regularly that you already know the cost of. Food shopping doesn’t count as that is not a fixed cost and may fluctuate month to month.

3) Understand your other spend

Get hold of your last 3-6 months of bank statements and some funky coloured highlighter pens. Create categories of spend such as “food shopping”, “socialising”, “general purchases (e.g. clothes, gadgets, whatever your vice is)”, “ad hoc travel” and allocate a colour to each. (You can use a different key however I find highlighters quick and easy). Go through your bank statements and code each expenditure line to a category. Once done tot up how much you’ve spent per category per month and write them down.

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