World Finance Info

Large numbers of people end up with financial problems, not because they’ve lost their income or had unexpected expenses, but solely because they are not used to drawing up a family budget. A budget is ideal to give you a clear picture of precisely what you earn every month and what you’re spending it on. Let us briefly discuss the principles involved in drawing up a budget.

Start off by writing down every cent you spend for a whole month. Keep a notebook at hand and write down whenever you buy something or pay an account. At the end of the month, draw up a spreadsheet or simply use a sheet of paper with different columns. Create categories for the different type of expenses, such as mortgage bond or rent, food, transport, entertainment, repairs etc.

You will immediately have a clear view of your monthly income and expenditure. The first time you do this, you will undoubtedly be shocked to see how much money you spend on things that are completely unnecessary. If your monthly expenses exceeded your income, you absolutely have to cut down on the expense side, and these are the items where you should start. It’s certainly nice to buy lots of beer and chocolates and toys for the kids, but when such items start eating up half of your budget you have to apply some restraint.

Your next step is therefore to examine all these expenses and see which ones are discretionary, in other words you don’t really have to spend money on them every month. Other expenses, such as the mortgage bond repayment, should be market in red, because you have no choice in paying them.

Even necessary expenses such as food and fuel can very often be adjusted downwards without making a huge impact on your lifestyle. If you are used to drive to the corner store, start walking there to save fuel. If you buy a lot of cooked meals at the deli counter, you could most likely save a lot of money by rather preparing food at home more often.

Once your expenses have been adjusted to force your budget back into balance, you have one more step left. You should make provision in the budget for expenses that occur regularly, but not every month. These includes things such as yearly insurance premiums, having the car serviced and family holidays. Also make provision for unforeseen expenses.

A practice that works very well with this kind of expenditure is to physically transfer the money every month from your check account to a savings account. This will take away the temptation to spend it on something else. If you leave the money in your check account, it’s very hard to keep track of these funds and you could easily spend it without even realizing it.

A successful budget will make your life immeasurably easier. For some reason you will suddenly find that their is always money for things that have to be paid. And, because you have budgeted for it, there will also be money for entertainment and other nice things. Even when the car breaks down, you will have money in your saving account to cover the expenses.

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