When it comes to budget planning there are several important steps that you need to follow to ensure you create a budget and follow it. Believe it or not but budget planning really is the easy part. So what’s the solution? There is no perfect answer to this problem. But we can come to a close approximation by using the simple technique of monthly averaging. Start by gathering 12 months’ worth of checkbook registers, bank statements, and credit card statements. Write down (or enter into a spreadsheet) how much you spent each and every time your money went toward something that was not a fixed expense. Group these expenditures into categories, such as auto, home maintenance, clothes, etc. Don’t try to break it down too far. What you want is a handful of useful categories. Then keep listing each of these expenses under their relevant categories for the full 12-month period.
To budget your money effectively you really need to be able to ignore peer pressures that may force you into unnecessary or unwise spending. Just because your neighbour or best friend is having two foreign holidays this year does not mean you need to also. Just because your brother or other relative has a new home cinema system does not mean it is essential for you too. From that we could introduce simple situations to show further that when the monthly budget for December was prepared it gave an income of $1000 with planned expenditure at $1500.
The trick here is to set up a separate savings account in which to set aside these “extra” funds. Let’s say the “extra” $100 goes into the savings account for six months, and then you get hit with an auto repair for $400. You pull the money from your $600 savings that was purposely built up for this type of expense. This way, you’re automatically setting aside amounts intended to cover each type of irregular expense that you encountered over the previous year. For example, if your refrigerator is on the blink and you are contemplating purchasing a new one, there are several factors you may want to consider. You may want to consider whether you will be paying cash for a new refrigerator or charging it, which will add interest to the amount of the appliance. You may also want to consider how much you can afford to spend for a new refrigerator and whether or not one of the newer, energy efficient models will help to save on electricity costs.
After you have your income figured out it is very easy to set up your budget. First, you have to make sure all of your bills are taken care of. Next, comes gas for your car and food. After that you need to put in any other necessities. Then, you need to figure in all your once a year expenses like car registration and license fees. 4. A solid budget makes it easy for you to make spending and investment decisions with confidence. With a solid budget in place, you know exactly where you stand financially and your investment decisions can be made with the right information at your fingertips.
On the other hand booking a vacation early, perhaps for the next year, can also be good value. Early booking deals often give two weeks for the price of one or other incentives. Knowing that you have a vacation booked for as much as 12 months in advance will give you time to save enough money also. It’s much easier to budget by converting your monthly income into weekly chunks, and making each available on a particular day each week. To calculate the weekly equivalent of your monthly salary you need to multiply by 12 and divide by 52.1775 (taking account of leap years). In months with only 4 “pay days” you’ll need to set something aside for those with 5.