When it comes to managing money and ensuring your finances are in check, the process can seem a little daunting. But it doesn’t have to be. Whether you’re dreaming of an expensive holiday, need to repay a debt or want to save some serious cash for your first home, creating a personal budget can make achieving your goals that much easier.

If you desperately want to budget your money and still manage to pay the bills, our six steps should help you to create a reasonable plan and stick to it.  

1. Have a goal in mind

Before you do anything else, you need to set yourself a goal. Are you trying to stop overspending? Do you have a debt to repay? Are you trying to save? What is the total sum you need to save or repay? Usually, the hardest part of a budget is sticking to it, and setting a goal will give you something concrete to work towards and keep you motivated.  

2. Work out the amount you earn each month

You may have a fairly good idea of how much money you get paid each month, but you need to work out the exact sum after tax. This shouldn’t be too hard if you receive a monthly income, but it can be a bit trickier if you’re a shift worker or self-employed and pick up work as it comes. Just try and work out the average amount you earned over the last 6 to 12 months to determine a figure.  

3. Figure out what you spend each month

Next, you have to track what you actually spend. Get your credit card statements, bills, car payments and receipts together to do the maths. Don’t forget your rent and any regular meals and nights out. Once you subtract your monthly spends from your monthly earnings, you’ll see what you’re left with and whether or not you’re overspending. Remember, this is the figure you’re looking to improve – so don’t be too disheartened if the bottom line doesn’t look great.

4. Set yourself targets

All of your expenses are either fixed (the same every month), variable (changeable from month to month, dependent on usage – utility bills for example) or discretionary (a variable expense that is not essential – such as the amount spent on eating out). You may not be able to do anything about your fixed monthly payments, such as your mortgage and car, but you can reduce your variable and discretionary expenses. Let’s say you spend $300 a month on takeaway coffee. If you think you’re overspending or want to save, set yourself a target to cut that amount down to $200. Then, do this for each of your variable and discretionary payments.

5. Create a savings plan

By now, you should have split your monthly earnings into targeted outgoings, and you’ll be able to see how much will be left over. With the leftover money, set up a savings account to ensure you have some funds set aside for emergencies. What if you lose your job or need to replace your car? Creating a plan is also an essential component of making sure you reach your savings goal.

6. Adjust when necessary

Sometimes, things happen in life that are completely out of your control. If you find yourself with unexpected expense, and realise you can’t stick to your budget, don’t give up. It’s okay to make adjustments to your budget to make achieving your goals more realistic. Besides, it often takes a few revisions before setting a budget that you can stick to in the long-term. 

If you’d like to discuss setting a budget with a reputable financial services advisor, browse Yellow Pages now and find a professional in your local area.