Building a Monthly Budget That Works For You

Building a monthly budget that works for you requires a detailed and bespoke approach, whereby you build a budget based on your unique set of income and expenses. This will help you keep better track of your cash so you can attain financial freedom.

Let’s take a look at how this might be achieved.

Differentiate Between Fixed, Variable and Optional Expenses

To build a proper budget, you need to list all of your expenses. Some expenses are fixed, some vary, and some are entirely optional. It pays to differentiate between these so you can plan better. It also helps you know which things you should prioritise and which things you can cut back on if you need to.

Fixed expenses are those essential expenses that remain the same every month. This might include rent, debt repayments, emergency fund savings, and insurance.

Variable expenses are also essential expenses. However, these go up or down depending on your usage and prices in any given month. These could be things like groceries, utilities, and petrol.

Optional expenses are a type of variable expense but are not essential. They are nice-to-haves and things that you could realistically live without if needed. This might include entertainment, drinks, or dining out.

List All of Your Income

For some people, tracking one’s income is as easy as checking their latest paycheck. However, for many others, there might be several income streams to keep track of. If you have a side hustle of some kind, then record this here along with your regular income.

If your income is irregular and varies from month to month, then try to determine a 12-month average and use that as your baseline.

Include here any other income you might expect to receive, such as commissions earned or tax rebates. This will help you get a more clear picture of your overall financial standing and how it stacks up against your expenses.

Do a Monthly Recon and Adjust

Even the most carefully prepared budgets are speculative in nature. This means that what you expected to spend will not always reflect your actual expenditure. Sometimes it will be more, sometimes less. This can either happen because you were not disciplined in your spending or because you underestimated or overestimated costs.

To ensure that your budget is truly useful, it needs to be as accurate as possible. For this reason, record your actual expenditure every month and compare it to your anticipated expenditure, then adjust your budget accordingly.

Over the course of six months to a year, you’ll start to see a more accurate and predictable picture emerging. Don’t just make a budget once and leave it like that. It won’t serve you well.

To find out more about what OTT Mobile has to offer in terms of digital payments and transactions, particularly if you prefer cash transactions, then contact us today. Use our cash vouchers to help you keep better track of your spending.

 

Leave a Reply

Your email address will not be published. Required fields are marked *