Having a plan for your money is key in this life. Creating a budget is one of the first steps towards having financial freedom. Budgets are great to help you work your way through the minefield of personal finances. There are loads of ways to draw out a budget and work it into your everyday life but it's so much easier if you compartmentalise your budget into different sections. Lots of categories can just make things confusing and be detrimental, which is why we want to focus on a handful of simple budget categories to help us through. Let's take a look at how you could split your monetary budget up to ensure you stick to it and succeed.
The Importance Of A Budget
There is a massive connection between money and mental health, as featured in the news on a regular basis. There are lots of us who perhaps don't understand numbers and how we're spending the money we're earning. This is why we need to keep things straightforward and clean with simple budget categories. Financial education is so important and with that comes the ability to budget. Setting a budget can be difficult to do and sticking to said budget can be even harder.
A budget is so integral because it helps you understand what we've got flowing into our lives on a monthly basis, what we are spending it on and how much we've got left over. If you are spending more than you are earning, you're in trouble. You're slowly entering debt and that wont work for funding your lifestyle, paying your bills or the consideration of starting to pay into a saving accounts. When we budget we understand. It helps us to know how much we have to live on and it stops us spending money on things we simply cannot afford.
The Simple Budget Categories
Let's take a look the simple budget categories that can help us focus on our money in an uncomplicated way.
One of the key things to first focus on is your debt. Once you pay this debt off you can start to save. Debt is a shackle. It's a weight around your ankle or on your shoulders that can debilitate your life. Pay off the debt you have and you can start focusing on a fresher future. Having a budget category of debt helps you see how much you have left over at the end of each month. This will help you pay off as much debt as you can every month.
We all need to live and whether we live in a one bedroom flat or a four bedroom detached property, we have bills to day. Our home category needs to include your mortgage or rent and your bills including gas, electricity, broadband and landline. You also need to add into this category the any insurance you have on your property and the council tax you have to pay every month. This will give you a figure of your monthly home amount.
Whilst we have a home, we must also live. Life is for living but living usually costs money. From gig tickets to nights at the pub, you need to tally up how much you spend and ultimately give yourself a budget. You need to stick this. If that means less visits to the cinema and more watching what's being shown on ITV2 instead, so be it. Living expenses also includes hair cuts, personal hygiene, healthcare and dental insurance. Maybe a gym membership? Childcare too, as this is often a huge expense and adding this to your category will open your eyes to just how much you're paying. Even life insurance as covering yourself in this way helps protect the future of your family.
The travel section of our simple budget categories including car payments, fuel and maybe that bus pass that gets you to work every day of the week. The maintenance of your car needs to be included here, tax, insurance and MOT along with any breakdown cover you have in place. We tend to travel different mileage at different times of the year. If you head to Cornwall once a year for your annual family coastal holiday, your fuel payments will be hiked during that month, for example.
We must all consume to live. This includes putting food on the table. If you do a big weekly shop, find ways to cut back on this by maybe going to a different supermarket or shopping locally at markets. Food in important but so many of us waste so much food every week which is simply throwing money away. Consumables also includes eating out if you do that, clothing yourself and your family and also products for household tasks. Such as washing powder for cleaning your clothes, dishwasher tablets if you have a machine and of course, loo roll!
The final one of our six simple budget categories is your savings. In order to go from surviving to thriving, we must start to put money into a saving pot if at all possible. This could include saving for retirement, saving for a holiday and saving for emergencies. In this category you could also saving for your first home. Savings aren't possible for everyone but once you figure out a budget and start to live within your means you are then able to push some payments into a savings pot.
Now we have our simple budget categories there are some top tips in order to fund these different sections. Where you can, set up automatic payments. You can so this with automatic transfers on your online banking as well as third party software like Chip. There are also a great range of budgeting apps that can help you. Revisit your budget every month and see what has happened and perhaps where you can improve. It's a learning curve and won't happen overnight. You need to start living within the monetary means you have. If you continuously spend more than you earn you'll never find a way out and the budget is pointless. With these simple budget categories, it keeps things straightforward and we can find focus on that end game.