If you haven’t already given much thought to budgeting for the year ahead, now’s a good time to start. Having a budget can help you reduce overspending, help you save more, and ensure you avoid situations where unplanned expenses drive you into debt. To help you plan a more financially secure 2018, here are our top budgeting tips.
A look back at 2017
Start with a review of the year gone by. That means digging into your bank account and your credit card statements to see how much came in and how much you paid out over the past 12 months. Use an online budgeting app, an excel spreadsheet or simple pen and paper to quickly calculate your monthly incomings and outgoings.
Taking a look at the money coming in: This could include your income from your job or business, your partner’s earnings, as well as any other money you earn from investments or government support. If you earn a fixed income, the same amount each month, it’s easy to calculate your month earnings. If your income is variable, add up the most recent 12 months of income and divide that total by 12 to give you an average monthly income to work with.
Write down all of your expenses using your review of 2017 to help you determine what these are. Pull out your bank statements and highlight those expenses that you pay each month – electricity, phone, car and insurance, food, school fees, as well as repayments to any loans or credit card.
While reviewing your monthly expenses, it’s worthwhile taking a look at how well you pay your bills. By ignoring bills and only paying them at a later stage, you could be incurring late payment penalties or interest charges that quickly add up to a sizeable cost.
Next, consider what additional expenses you may need to add to your budget for the year ahead. For instance, you may be planning a holiday mid-year, or perhaps one of your children is starting University and you’ll need to set aside money to pay some of those fees.
Add these expenses into your budget so you’ll know how much you’ll need to save each month to cover those costs. Don’t forget to factor in the irregular bills like your annual car service or bi-monthly hair appointments. You could either estimate these costs up front or set aside a miscellaneous amount each month to cover these.
Determine your goals
As well as ensuring your monthly income meets your monthly expenses, think about any short-term and long-term goals, like buying a new car or planning for your retirement. Decide how much money you’ll need to achieve each of these goals and then factor your savings goals into your budget by setting aside funds for each of these goals.
Make any necessary changes
Once you have a much clearer idea of how much you earn and how much you spend, you may need to make some adjustments to your spending and saving habits. It could be something as simple as taking a packed lunch to work every day instead of buying lunch or setting up an auto payment from your salary directly into your credit card to chip away at your consumer debt.
If you need financial advice around saving for your first home or planning your retirement, get in touch with a Mortgage Express broker.
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