Creating a budget is the foundation of financial stability, and it’s never too late to start. Many of us face financial stress due to rising costs of living, especially with housing, food, and transport expenses. A well-structured budget can help you stay on top of these costs and plan for the future.

By understanding your income and tracking your expenses, you can set realistic goals and work towards greater financial independence. Here’s how to get started:

Step 1: List Your Income Sources

Start by gathering information about all your sources of income. This could include your salary, benefits, rental income, or any other money you regularly receive. Make sure to calculate your income after tax (net income), so you have a clear picture of what’s actually available to spend.

Step 2: Track Your Expenses

Write down all your monthly expenses. Start with fixed costs, such as:

• Rent or mortgage
• Utilities (electricity, gas, water)
• Loan repayments
• Insurance premiums
• Childcare

Next, track your variable costs like:

• Groceries
• Transport (fuel, public transport)
• Entertainment
• Dining out

Use tools like our budget worksheet [link] or a simple spreadsheet to track these expenses. This will give you a clear understanding of where your money is going.

Step 3: Categorise Your Spending

Once you have all your expenses listed, divide them into needs and wants:

• Needs: These are essential expenses, like rent, utilities, and food.
• Wants: These are non-essential expenses, such as entertainment, dining out, and subscriptions.

This will help you identify areas where you might be able to cut back.

Step 4: Set Spending Limits

Review your expenses and set limits on how much you can afford to spend in each category. The goal is to ensure your needs are covered while reducing unnecessary wants. For example, you might decide to cut back on dining out or subscription services to free up more money for savings.

Step 5: Plan for Savings

A good budget will also include a savings plan, even if it’s just a small amount each week. Emergency savings can provide a cushion in case of unexpected events like health issues or job loss. Even if it’s just a small amount, aim to include savings as part of your budget. Set a realistic goal, like saving $20 per week or 5% of your income. Having an emergency fund for unexpected expenses (such as car repairs or medical costs) can give you peace of mind and help avoid going into debt.

Step 6: Review and Adjust Regularly

Your budget is not set in stone – it should evolve as your financial situation changes. Set aside time each month to review your budget and adjust it if necessary. For example, if your income increases, consider boosting your savings or paying off debt faster. If you have unexpected expenses, adjust your spending limits.

Step 7: Stick to Your Budget

The most important step is to stick to your budget. This may take time and discipline, but as you get used to tracking your expenses and adhering to your limits, it will become a habit. Don’t be discouraged by setbacks; just get back on track as soon as you can.

With a budget in place, you’ll gain more control over your financial decisions and reduce stress about money. Check out our budgeting worksheet [link] here to get started, or book a Financial Mentoring session with one of our experts and start building a budget that works for you. Enquire online or call 0508 678 910.