How do I make a basic budget for myself?

Money management is a bit like learning to ride a bike: the earlier you start, the better you’ll become. Just as you learned to balance on two wheels, creating a basic budget can be like your stabilisers for mastering your money. Whether you’re working part-time, getting pocket money, or simply want to be more responsible with your cash, creating a basic budget is a fantastic place to start.

In this article, we’ll break down the process into simple steps and provide you with three essential tips to make budgeting a breeze. Let’s get started!

Four steps to making a budget

Step 1: Calculate your income

The first step in creating a budget is to figure out how much money you have coming in. For most young people, this might include pocket money, part-time work, or even money from odd jobs. Make a list of all your income sources and add up the total. This will be the amount you have to work with when planning your budget.

Step 2: List your expenses

Now, let’s look at your spending. List all your expenses, including both fixed and variable costs. Fixed costs are those you must pay regularly, such as your phone bill or travel. Variable costs, on the other hand, are more flexible and can change from month to month. These might include entertainment, going out to eat, or shopping for non-essential items.

Try to be accurate, and where you’re not sure, guess larger not smaller so that you have money left over, rather than ending up short. You can also try keeping a spending diary for a week to see how much you might spend on average in any seven days.

Step 3: Create Your Budget

With your income and expenses in mind, it’s time to create your budget. Here’s how to do it:

  • Prioritise essentials: Start by covering your fixed costs. These are your priorities because they are necessary for your everyday life. Make sure you allocate enough money to cover these expenses.
  • Allocate money for paying debts/savings: One of the most important aspects of budgeting is thinking ahead about what decisions made now will help you build a better financial future. If you have enough income to do so, set aside a portion – even if it’s a small amount – for paying off debts or for savings if you’re debt-free. Reducing debt and building savings will both make it easier to budget in the future as they will improve your financial flexibility.
  • Manage variable spending: After covering essentials and saving, you can allocate the remaining money for variable expenses. This is where you decide how much to spend on entertainment, eating out, or shopping. Be mindful not to go overboard and stick to the budget you’ve set.

Step 4: Review your budget regularly

Don’t be disheartened if at first you don’t stick to your budget. This is common, because as you work through steps 1-3 you’ll likely have to make some guesses. The key to making a budget that you can stick to is reviewing it at the end of each month and refining it until it works for you.

Life also changes, and so whenever your financial circumstances change, whether that’s an increase in income or expenses, it’s time to review your budget again and adjust it to suit your new situation. Again, this might take a few months of refinements to get right.

Three top tips

Track your spending

Keep a record of everything you spend your money on. This will help you see where your money is going and make adjustments if necessary. There are plenty of apps that make tracking expenses easy and even a simple notepad can work.

Set realistic goals

When creating a budget, set achievable goals for yourself. Don’t try to save all your money or cut out all fun activities. A good budget should balance responsible spending with enjoying your life.

Adjust as needed

Life can throw curveballs at you, and your budget might need to adapt. If an unexpected expense comes up, or you realise you’re consistently overspending in one category, don’t be afraid to adjust your budget accordingly. Flexibility is key to a successful budget.

Creating and maintaining a budget might seem daunting at first, but it’s an essential skill for young people to develop. It’s your ticket to financial responsibility and the freedom to make informed choices about how you spend your money.

By following these simple steps and tips, you can build a stable foundation on which to build up your financial success and set yourself up for a brighter future.

So, get started on your budgeting journey today, and watch your financial confidence and freedom grow!

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