Wednesday, April 9, 2014

Creating A Budget

If there's one thing I'm good it, it's living on a budget. Depending on grants and learning to stretch that money has been quite a ride, and it hasn't been an easy one.

Like I mentioned in a previous post, I've been thinking about moving, but for that I have to make sure I can afford it. At the moment I'm living in a flat with 3 other roomates with whom I split the bills, but if I leave, the bills will be just for me. Sure, I'll probably use less water and electricity but I still have to do the math.

So I thought this would be a great opportunity to discuss how I create and stick to a monthly budget (and trust me, creating it is the easy part!).



Okay, so first things first, gather all your bank info, old bills, receipts, tax papers, etc, a calculator and some paper. I use a Monthly Budget Control printable, but paper works just fine.

First you want to think about where your money is going and set two categories: "need-to-pay" and "want-to-pay". Let's focus on the "need-to-pay". Write a list of all the bills you HAVE to pay each month, what you can't cut and can't get out of: mortgage/rent, insurance, electricity, water, transport (people always forget this one)... Look at your old bills. How much do you usually pay per month? It doesn't have to be a concrete figure, just a rough idea. You'll also want to include groceries in this category, after all, we need food to survive (or so they say...). Note: I'd like to talk about how to save money on groceries in a future post, so stick around for that soon!

Okay, now add those numbers up and deduct that from your monthly income. That's the money you have "left-over" (I hope it's a positive figure). If you can, take about 10-20% of that and save it. Some people prefer to take this percent from the overall monthly income, but bills have to be paid and sometimes saving just isn't an option.

Now take whatever money you have left and divide it into subcategories for things you'd like to do or stuff you'd like to buy: hairdresser, entertaintment, clothes for each member of the family, babysitter...Use every last cent. This will be your "want-to-pay" category.

You should now have a few figures jotted down: total monthly income, "need-to-pay" expenses, savings and "want-to-pay" expenses. There you go! That's your budget! Now all you have to do is stay under those figures. For example, say you have 400€ for groceries each month. At the end of the month add up your receipts and see how much you've spent. It will be hard at first, but you'll learn to control your spending. If you really don't trust yourself, try the envelope method. Stick those 400€ in an envelope and take this with you everytime you run to the store. Only use the money that's in the envelope and once it's gone, that it!

I hope you guys found this post useful and I'd love you hear all of your ideas and experiences about budgeting so don't forget to leave a comment below!!


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