Budgeting

Using the information

Once you have your detailed listing of your income and expenses, and have tracked your spending to see where the money goes, the next step is to analyse the results and see where you go from there.

It should be fairly easy to see from the information where you might be able to cut back and save some money (like with most changes in life, it's often better to do it gradually. You can implement small changes in your spending habits based on your budget. As you gradually get each section of your spending under control, move on to the next. It's far less painful this way, and sets you up with good money habits). If you need some ideas on how to squeeze more from your pay packet, have a look at some of our money saving ideas. You should be able to see at a glance, for example, how much you spend on drinks during the month. While you don’t necessarily need to completely cut out items of expenditure, you can limit the amount you spend on certain things by a percentage. So by cutting back in any one area by 20% or so, you could then allocate that money to go into the debt reduction column, and so on. If you’re tacking debt then the idea is to shave off as much from other areas as possible and redirect that money into debt reduction. Create a second budget with your proposed spending patterns once you have identified areas in which to cut back. The first budget will be a reflection on your actual spending, and the second should be how you would like your spending to be reflected. Make sure that your second budget clearly states how much money you have to spend on certain categories, like entertainment, and make sure that you do not exceed that limit. It sounds simple, but if it truly were then none of us would have debt problems.

The key to good budgeting is to be honest with yourself about your spending, and to keep good records on how much money you have coming in, and where exactly it is going out. Spend some time each evening to tally up your running balances and to check if you are over budget or under for that time of the month. This helps to keep you focused on the longer term goal and keeps your motivation for adhering to the budget high.