Creating a Budget Part 2

Things to think about before you make a budget:

There are 2 basic things to contemplate before making a budget:

WANTS and NEEDS

The easiest way to think about your “wants” is to identify your “needs” first.

Needs are essential for our survival:

• Food
• Shelter
• Clothing

Things that are fairly necessary are:

• A reliable car
• Insurance (to protect your assets)
• Utilities (gas, electricity, water etc)
• Communications (phone)

Wants: Things that are not necessary for survival but make life more interesting. We need food but we do not need to eat expensive lobster, we need clothing but are designer outfits really necessary, we need a vehicle but do we need an expensive car when all we need is something to transport us reliably from A to B.
You get the drift, I'm sure.


After you have tracked your spend it is important to evaluate the outcome. ARE YOU SPENDING MORE THAN YOU EARN? If so that when you need to do some hard thinking. One good thing about this evaluation is it informs you when your expensive months are so you can hatch a plan to cover all your expenses.


After you have evaluated your spend then you need to work out where you can cut expenses.
Fixed expenses are easy to identify and these usually are things like your mortgage or rent and loans and are items that CANNOT be readily cut back on.
Think about challenging yourself to getting by on less groceries by being efficient with your cooking and smart with your buying.
Do you really need to go out to the movies, when a night in with a DVD would be just as much fun. Can you take public transport or carpooling rather than driving your car every day? Don't forget the impact you can make to your electricity, by turning off lights and appliances when not in use.
Establish a savings plan:
Saves as much as you can, even if its only $5.00 a week, its a start. Save all your coins in a jar or tin.


Hints:

• There are many good apps for your phone that you can use to track your spend or track your savings.
• Remember, for your budget to work it needs to be realistic. If its too tight you are likely to blow the budget, so make sure you factor in some sanity money for yourself so you can treat yourself.

After you establish your budget and implement it you will find you have a greater sense of peace as your bills will be covered.


Next time we will discuss the nuts and bolts of the budget to enable a smooth transition so you will have money when the bills come in.