A simple budget is a way to organize money and a plan of spending it. It is a means for recording your income, fixed bills, and expenditure statistics so that you can see at a glance how much you have left to spend. A budget also tells you where your money is going every month so that you know where savings need to be made/spent as well as what expenses are most important. A simple budget enables you to live life on your own terms with less stress.
Best tips to make a simple budget
1. Define Your Budget
This is the first step in setting up a budget. Define your budget as you think best. This might be based on income, expenditure or savings – it could be a combination of all three.
2. Use The Same Accounting System Every Month
Ensure that the same accounting system is used throughout the year so that you have consistent figures and it will be easier to compare budget with actuals at the end of the month or year. You will also see trends and spending habits emerge over time. You can then modify your plan if there are areas where you are spending too much money or not saving enough for goals such as a holiday, car or home improvements.
3. Set Minimum and Maximum Spending Limits For Each Budgeted Item
This will help you to control spending and compare it to the income you have. If you have a maximum or minimum limit, there is no way that you will go over budget. This includes all fixed bills as well as discretionary expenses. Examine your income and expenditure every month so that you can adjust from time to time if need be.
4. Record Your Expenses And Income Every Month
Record both incomes and expenditures on a monthly basis for the entire year so that the budget can be analyzed at the end of the year for those who want to know where their money went each month e.g. for tax purposes. Start with a fresh sheet of paper and record all income and expenditures for the month so you can get a clear understanding of how much you have left to spend.
5. Take A Break From Your Budget At The End Of The Year
After completing your budget for the year, take some time off from using it. If you plan on using it again next year, you might want to take even longer off as this way you will get a fresh perspective on your budget and will be able to see how it could be improved or modified in any areas such as where most of your discretionary spending is occurring each month.
