Creating a budget
Budgets are often seen as a bad thing and yet their very real purpose is to put you back in over control over what you do with your money by helping you to focus your limited resources on the things you really want to achieve.
Without a budget to guide you it’s all to easy to be controlled by advertisements, shops and credit card companies all of which want what is yours.
The very essence of a budget is to allow you to plan the lifestyle that you want today while saving for future needs and having enough to bless others. Ideally they should track income and expenditure for at least 2 years, although the longer the time-span the better.
When set up in a spreadsheet they can be updated each month with actual income and expenditure and used to predict future cash requirements.
Step 1: Create a list of income and expenditure categories
This list should cater for any income/expenditure that you deal with on a frequent basis (e.g. at least once a year). This list can be grouped into the following headings:
Car and travel expenses
Essential living expenses
Savings / pensions
Other living expenses
Each column represents one month and at the bottom will be a calculation that shows total income less total expenditure. This ‘surplus’ (or ‘deficit’) should represent the amount of money you will have left over in the bank/wallet will be your opening balance for the following month that should be added to that month’s income.
Step 2: Put in last year’s actual figures and an estimate for the next two years
If you can, enter the last 12 months worth of actual information. This will help you to identify when annual payments such as insurances as to when they become due. You can then use this to put in a forecast for the next couple of years.
Don’t forget to increase some annual figures to take into account price rises. Also put in amounts for things like holidays and special events such as day’s or meals out.
For Christians, tithing 10% of your income to the church is an important principle. It’s one where God says we are to test him in:
“Will a man rob God? Yet you rob me. But you ask, 'How do we rob you?' "In tithes and offerings. You are under a curse—the whole nation of you—because you are robbing me. Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this," says the LORD Almighty, "and see if I will not throw open the floodgates of heaven and pour out so much blessing that you will not have room enough for it”. Malachi 3:8-10
Step 3: Examine the list
Now take a good look at the list and ask yourself if you should review some of your spending – do you really need that gym membership? When was the last time that you read the monthly magazine you subscribed to when you were feeling bored? Could you take a packed lunch to work rather than popping into the local sandwich shop every day? Are there some direct debits that you feel you could cancel immediately.
Step 4: Set Goals
If you are using the spreadsheet you can now start to amend the forecast figures. As each month’s surplus/deficit gets accumulated into the following month, you’ll be able to see which months is where you need extra cash to cover things like annual payments. You should also see where surpluses can be put into savings accounts so you can earn extra interest.
If you are doing this manually on a sheet of paper, highlight those areas where you could make some changes to your current spending. What ever method you are using don’t forget that you need to be realistic in setting your goals, otherwise you’ll get discouraged when you are unable to achieve them. Remember that you can always amend your goals if you find them unreasonable. Give it a try – with some careful planning this discipline could really liberate you.
Step 5: Monitor the plan
As each month ends you should update your planned spend with what you actually spent. You may also then want to change any future figures – for example if you have just renewed an annual insurance then put in a realistic figure for next years renewal.
To help you with this task we have created a spreadsheet that you can use. You can download it by selecting here.
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