How to budget your money?

No matter what your financial situation is, knowing where your money is going each month is essential. Having a budget helps you be more in control of your finances and let you save money in the short and long term. 

Here is how you can budget your money easily:

1. Find your income after tax

In order for you to fix your budget, you need to know how much money you earn and how much you end up being able to spend after paying your taxes. That’s what’s called your net income. If you are an employee with a fixed salary every month, this will be a fixed amount each month. 

If you are self-employed or a freelancer, you might receive your entire income without taxes being deducted. Try to put 20% of your income aside, after the amount that you’re reserving for taxes.

2. Track your spending

Knowing how much you’re spending every month is the best way to identify where your money is going. Also, this will help you see what you spend most of your money on. Categorising and keeping track of all your expenses is a great way of having a clear understanding of your spending habits. It then makes it easier to make adjustments and changes to save money. 

Start by listing all your fixed expenses such as rent, mortgage, insurance, utility bills etc. Most of the time, you won’t be able to save too much money on those since they are necessities. However, being aware of how much of your income they take up is useful.

Then, listing all your variable expenses is the way to go. They include those that may vary from month to month. Indeed, this is where you will find opportunities to cut your expenses. Variable expenses include petrol, entertainment, groceries, clothing etc. 

The best way to estimate your monthly expenses is to look at your bank statements. Since they usually categorise and itemise every expense. 

3. Set short and long term goals 

Before you even start building your budget, you need to fix long term and short term goals. Goals will help you stay focused on what is important. Plus, it’s a great source of motivation when you’re planning to save money.

Short term goals are what you want to achieve in less than a year. On the other hand, long term goals are what you want to accomplish financially over longer periods. This could be saving to buy or renovate a house, retirement, paying off your mortgage etc.

Just keep in mind that your goals don’t have to be set in stone. In fact, it’s just the best way to identify your priorities before you start planning a budget.

4. Create your monthly/yearly plan

With your variable expenses and fixed expenses, you can estimate what you’ll be spending for the next couple of months. Indeed, thanks to your fixed expenses, you can predict quite accurately how much money you will spend. On the other hand, you can use your past spending habits to make an estimation of your future variable expenses. 

Moreover, you can break down your budget by separating your expenses into 2 different categories: The things you need and the things you want to spend money on. For example, rent definitely counts as a need, as opposed to your Netflix subscription that may be considered a want. As a result, it will be easier for you to pick out what’s most important when you make changes to your budget. 

5. Change your spending habits

You might think that you are already managing your money correctly. But if you don’t have a budget, it’s more likely that there are changes you could make. Now that you have documented your income and your spending, you have an idea of how much money is left to divert towards your goals. 

Therefore, you can decide that you are happy with your spending habits or decide to change. You can have a look at each expense and find a way to reduce them. You can find ways to save money here

The expenses that are not necessary is where you need to look at first. Try to adapt the figures and see how much money you can save in the long and short term. Small savings can add up to a lot of money, so don’t overlook the “little stuff”. You might be surprised at how much extra money you can save by making one minor adjustment. However, If the numbers still aren’t optimal, you can look at adjusting your fixed expenses. Although it will be much more difficult, it’s possible.

6. Keep checking your budget

Reviewing your budget regularly is really important, it helps you stay on track.  Plus, you can compare your monthly expenses to other people who have a similar lifestyle, your friends, family, colleagues etc. 

You should know that only a few elements of your budget are set in stone: You can get a raise, your expenses may increase or decrease, or you may reach your goal and want to plan for a new one. Whatever the reason, always update your budget and follow the steps above.

How can we help you?

As financial advisors, we can help you create a professional and personalised budget. It can be overwhelming to create a budget for yourself. That’s why we are here to make it easier for you and build a financial plan that will suit all your needs. You can get a free financial review by calling 01 853 2727

Get in touch now and talk to one of our qualified financial advisors.

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Greenway Financial Advisors Limited is regulated by the Central Bank of Ireland. Registered No. C168372

Debbie Cheevers

Debbie Cheevers

Qualified Financial Advisor

Debbie was born in Dublin and graduated from NCAD with a degree in Visual Communication. She brings a strong customer services background to Greenway.

Debbie qualified as APA in 2017 and a fully qualified financial advisor (QFA) in 2018.

She believes that product knowledge is key to helping customers make the right choices.