Money Management

Money Management

by | Jan 11, 2022 | Financial Institution

As we step into the new year, it is important to implement good habits that will carry on throughout your life. In the span of one year the coronavirus pandemic and the results of an economic recession has led to the importance of budgeting. If your new year’s resolution is to try to get in control of your finances, the first step is to establish a budget – as this will provide you with a guide for your money.

How to make a budget

Step 1: Assess your financial situation
The first step is to calculate how much your income is on a monthly basis.

Step 2: Determine your expenses and debts
Review your financial records to determine how you are spending your money. Tip: Separate your fixed expenses that you must meet (mortgage,rent, car payments and insurance) from variable expenses (food,clothing, and entertainment).

Step 3: Set Goals
Establish a goal that you wish to achieve.

Step 4: Create a plan
Once you have established what your income and expenses are on a monthly basis you can create a plan that matches with your financial goals.

Step 5: Pay yourself
When you pay yourself first you are simply setting aside a fixed amount of money each month to go into an account you will not touch.

Step 6: Track your progress

At the end of every month, you should re-evaluate your budget. Compare your actual expenses and income to your budget and make appropriate adjustments. Many people will struggle to stick to their budget, especially the first time around. Let’s go over a few things that can help you get back on track. First and foremost, changing your mindset about budgeting. Instead of using the word “budget” consider it as a spending plan. The idea is the same but the difference is the vocabulary that helps change the mindset of people, this allows you to feel as if you are in control rather than restricted. You can also try different budgeting techniques, if you’re using an app to track your spending try creating a monthly spreadsheet.

One thing to keep in mind whilst first budgeting, it takes a few months to perfect. Provide yourself with flexibility in the beginning and set attainable goals for yourself.

Whilst many are able to set a budget and maintain it, if you are really struggling after a few months it would be wise to reach out to a professional. Here at Debt Review, we are able to take you through an assessment to assist you with obtaining financial freedom, so you may start doing more of what you love this year.

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