Budget Plan

Introduction

One should always check her/his pocket before setting the rocket in case of doing financial expenditure, for having a smoothly running family making a Budget Plan is the smart way to go about it. A good budget plan makes sure that you do not spend more than you earn, it is important to know where you stand financially in life and what the luxuries that you can afford are and what are the ones that you cannot. Budget planning also gives you an idea about how much money you need to earn more than your current earning to avail certain things.

Budget PlanWhat do you need?

Like any other planning, budget planning is a time taking job so you must have a good amount of time in your hand when you start. Before starting to plan you should have an hour at least in your hand. Such a planning involves a lot of paper work and thus you must get hold of a number of papers beforehand.

The papers that are required are a few months’ bank statement, your credit and debit card bills, get copies of your household bills like electric, gas, maintenance, etc.  Your income details along with any pension details of any other family member. A very important paper is your savings details. Nowadays one job is never enough so most families have multiple income sources so it is advised to get hold of any other income details available.

Once you have gathered all the above mentioned papers you are good to go.

Income Summation

The next thing to do is to add up your income, everything that you might earn, a common mistake that people do here is that they do not add their yearly incomes which might be a small amount in comparison to your monthly one but it does add precious cash when it comes down to the wire. Along with this add up all your investments and also do not forget to deduct all taxes and insurance instalments if any. If you are making a spreadsheet or any other computer based pages to make this budget then make separate columns for your regular or monthly income and your irregular yearly or weekly income.

How much are you spending?

Now calculate how much you spend on monthly basis. And do not forget to take into account your irregular expenses like on New Year and Christmas. You must have accurate numbers when you do this calculation, it is better to avoid any guessing games here. Remember like when you added up your earnings you did so separately for occasional and regular earnings, likely do so for your expenditures so that you have two different calculations.

Compare income and expense

Now place your income and expenditure amounts side by side and take away all that you spend from all that you earn. If what’s left is in negative than you must be cautious because this will suggest that you are spending more than you earn and soon this will put you under debt from which you will not be able to get out of. You must be looking out for ways to curb your expenses ASAP.  On the other hand if your expenses are lesser than your income than you are actually saving some money and that is good news. Do plan on how to increase this amount and also make plans on where to spend it.  Thus you can see that making a budget is a very healthy habit and it does help you to realise the ground on which you are standing.

What to do with your plan?

Now that you have a clear view of your income and expenditure you can make the necessary adjustments in your expenses. Note that small changes made to your monthly or weekly or daily expense can make big differences. For example not buying a takeaway coffee daily can save some good bucks. But not all spending can be curbed; there would be certain things where you will have to spend money while others will be easier to tweak. So go ahead and do tweak the ones that you can to get the extra cash that might help you to live a debt free life. So keep planning your budget regularly and live safe.