Clever Commerce

Jun 21

How to create a budget (and stick to it) without feeling guilty

Posted by Deborah Harris at Sunday, June 21, 2015

Are you struggling to keep on top of your bills? A budget can help you organise your finances, saving you not only time but also a lot of worries.

Unfortunately, a lot of people think of a budget as a form of punishment, like going on a diet or even to jail. “You have been found guilty of spending too much money, and you must now pay the price” (no pun intended).

Not surprisingly, most of these budgets fail.

But a budget isn’t about punishing anyone. It’s simply a way to find out how much you earn, how much you spend, and how to get the things you want.

And when you’re actually creating your budget, that ‘finding out’ can be a real eye-opener. Filling out the income is easy, because nearly everyone knows how much they earn each month. But do you know how much you really spend?

It’s time to find out.

Start with the easy stuff—your bills. List each one, along with how much you need to pay and when you need to pay it. This is important, because cash flow problems are often about timing more than anything else. You’ll have the cash eventually, just not when the bill is actually due.

You may also want to add any debts you have (along with the interest rates and remaining amounts) so you know which ones you should pay off first.

Next, move on to the basics such as groceries and car expenses. If you go out for lunch every day, add it as a spending category. Same goes for any hobbies you regularly spend money on.

It may seem like having your nose rubbed in your spending habits, but that’s not it at all. You’re just trying to find the places where you spend your money.

Hot tip: To quickly work out your income and expenses, and make sure you list all your expenses, use a budget worksheet or online accounting software. Here are a few of my favourites: 

Now it’s time to identify your budget amounts. To work out how much you really spend, collect all of your receipts and bills for a month. It might sound hard, but it’s really quite easy. Just get a receipt for everything you buy, and then have a place where you can put them all at the end of the day. (A shoebox at the front door works wonders, because you can put them in there as soon as you walk in.)

Once you have a month’s worth of bills and receipts, go through them all and start filling in the spending category amounts, creating extra categories if necessary.

Hot tip: If you can, scan or photograph your receipts. You’ll then be able to either email them to Receipt Bank (who’ll then send the transaction directly to your Xero account for reconciliation), or upload them to myprosperity so you can see them. If you can’t, you can put them all in a bag and send them to Receipt Bank, who can then upload and forward them all to your accounting software. Cool, eh?

Keep doing this for a few months to get a realistic picture of how you spend your money. You may be surprised at just how much you spend on certain items, and find ways to save money straight away without causing too much pain.

Make sure you scrutinise every item. When it comes to cutting costs, everything is negotiable—even seemingly fixed expenses such as your electricity or water bill.

Remember: you’re creating a budget to manage your spending, not limit it. And while you may be surprised at where your money goes, there’s no need to feel guilty about it. Instead, you should feel a sense of relief knowing where it’s all going.

And that you can fix it.

If you’d like more information, or maybe some help and advice on creating your budget, get in touch with the Personal Financial Management Team at Gill, McKerrow. They can help take control of your finances so you can achieve your life goals.

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