Personal budgeting is useful and easy to set up, firstly write down all income and expenditure for the year and list expenditure under Essential, Non-Essential and Luxury.
This will show whether your income covers your Essential and Non-Essential costs, if it does great you can then decide what to put aside for savings and Luxuries.
If it doesn’t then you either need to increase your income or reduce your costs and this is where setting your budget and monitoring your spending comes in.
By splitting your costs, you can see what income is needed to cover your essentials, if covered move onto the non-essential and prioritise what’s most important you to. Everybody needs a little luxury but this is where you can make significant savings by changing your lifestyle if you need to.
It’s helpful to use different bank accounts e.g. a bills account where your wages are paid, a personal spending account, and a savings account. Set up monthly standing orders into personal and savings accounts and keep a breakdown of each amount being saved and what it’s for in excel. For example you might save for a holiday, new car or new kitchen, by making sure your regular bills are covered in the main account and putting aside savings you then know how much you can spend each month in your personal account.
It seems obvious but how many of us actually do it?