Following my previous post, I have decided to explain how to make your own personal budget.
It is not hard, don’t think that if you were not good in maths in school you won’t be able to do one. Don’t let anyone convince you, you cannot manage your own finances. Trust me, my grandmother was illiterate and she ran a business by herself because she knew this basic rule.
This is as simple as Income – Expenses = Surplus.
Income is everything you receive per month.
Expenses is everything you pay for, or spend money on per month.
Surplus is the amount you have left, after your pay your essential expenses.
Your objective is always to have a positive surplus, this means your income is bigger than your expenses. It means you have money left, after paying all your bills.
You can have a negative surplus, it is called a deficit. This means your income is smaller than your expenses and it means your income is not enough to pay all your bills.
Income can be your wages, benefits, parents allowance, etc. It’s all the money you get every month.
You can split income in two categories:
Reliable source of income is when you know, for sure, you will get that amount every month. This can be your wages or benefits payment.
Unreliable source of income can be a parents allowance, ex-partners allowance, a side job you may have. It is any money that you may or may not receive. The payment dates can vary, as well as the amounts, some months you may get £100, other months you may only get £20 or £0.
Expenditure you can also split in to two main categories:
Essential expenditure are all the expenses you have monthly, that you have to pay such as rent/mortgage, utilities, food, medicines, mobile + internet, insurances, school fees.
You should always pay your housing expenses, food, education bills/fees, insurances, first. These are items you cannot survive without.
Non-essential expenditure are expenses that fluctuate, that you may spend money that month, or not. These can be a massage, nail appointment, dining out. It is everything that if you can’t afford this month, you may afford next month. These are items you can survive without.
This is not hard, right?
You can do your personal budget in so many different ways:
- Pen and paper
- Excel spreadsheet
- You can use an App. Please bear in mind that many of these apps will have access to your personal data.
It doesn’t matter how you do this, but it is very important that you do it.
Many of the bank apps have budget tools and you can visualise how much you’ve spent on different areas. Be aware that some items will be mixed up together and it will not give you a true reflection of your expenses. Example, my supermarket bill will include my food bill (essential expenditure) but may also include magazines (non-essential expenditure).
If you do your own budget, you can split these two items, food at the top since it is an essential expenditure. Magazines will go at the bottom, because they are non-essential expenditure. If I can’t afford Vogue this month, I will survive and can consider buying it next month.
I will leave here a link if you wish to get more information about doing your own budget: https://www.stepchange.org/debt-info/income-and-expenditure-financial-statement.aspx?channel=ppc&gclid=CjwKCAjwz6_8BRBkEiwA3p02VTIX02JZ2DfD2o78B0Bl3AzN_L74QrDs4a8-pqjf01OMpcwVzgoB9xoCfdQQAvD_BwE&gclsrc=aw.ds
I also want to highlight on this post, one tool that will help you make automated savings. Most bank apps offer round-ups and this will allow you to save money, without you even noticing it. I use these tools a lot and I can assure you, it works.
These tools will round-up all your transactions to the nearest £1. Example: I pay £1.60 for a coffee, £0.40 will go to a savings pot. After a year or so, you’ll see how much money you saved!
You can of course set an automated payment instruction to save a specific amount every month, if you are that disciplined, great news.
Listen, this is simple! Once you control your finances, you will feel so empowered and you will be able to save and afford a new pair of shoes or maybe a new trip. I am saving for a trip I want to do in 3 years time.
If you have doubts, please let me know.
My name is Franca and this is personal.
Franca Personal Style Consultancy 