Budgeting Tips

Most people have spent some time on their budget and have in fact probably done a great job. There are different kinds of income though, so be sure to make a budget that is tailored to your specific needs. Lot`s of people get a very stable `level` income each month, but there are also lots of jobs where your income will change based on time worked, performance or commissions. These can massively change your budget and need to be accounted for when you are managing your finances.

Even if you have a steady income that comes every month, but can do extra things at work / via a second part time job to increase your take home. This gives you somewhat of a variable income stream for the year.


Variable Income Budgeting

The way that these variations are compensated for when budgeting is to make two budgets. Simply make an excel spreadsheet and put in a low income and high income budget. Make one budget where it shows how much you make on the good income months and another for the lower income months. Look for patterns in your income. Go back over the last 18 months or so and see how and when your income peaks and troughs. This also allows you the chance to see about knocking down any recurring debt you might in better months or what extra, more expensive, activities you can afford to book at certain periods of the year.

Payment shock is a term often used to describe the difference in amount payed out from when one takes on major new commitment, such as buying a house or a brand new car. This same idea of income to bills payment shock also occurs during some periods of the year. Depending on how big a difference that is you might have to make special adjustments like setting savings aside during the good months to prepare for the upcoming bill.

Don`t forget to keep track of all your smaller expenses; meals out, contactless bar payments, fast food, parking, cigarettes or vape gear ……it can all add up to quite chunk and can be an area to manage down. This is the number one thing you have to do in order to control your finances. If you don`t know where your money is being spent, how can you take care of it? This becomes even more important as you get into business budgets and profitability.


Commission Based Employment

When you have a sales job that is largely based on commission, you are going to have variable times of income. This makes it much more important to have some type of cash reserve or allowance system setup to make sure that you have enough to pay your bills and also live on.

  • The first idea is that you keep a fairly large cash float as reserve in one bank or building society account that you make all your transactions through. This way you will be able to pay bills and absorb the cost as they come along. The downside is that you have could have a lot of cash sitting around that isn`t working for you.

  • The second idea is to have all your money go into one savings style account and then give yourself a constant income from that into a current account to use for daily living and regular bills. This will give you steady and consistent cash flow. You can have multiple set payouts at certain times, or you can just put your income into a high interest saving account and pay out of it once per month, this should give you better interest overall.

These are just a couple ideas to help people compensate for differing incomes and budgeting around them.


How To Prioritise Your Budget

An important yet often overlooked element of almost everyone`s budget is the forward planning. Spend time looking at your options, come up with a great solution, and then put it to work. Planning is an extremely important part of your financial picture. You also need to go back through your finances periodically and even change your plan because we all know things surely do change….usually when we least expect or want them to.

Let`s go over the steps that you need to go through in order to put your priorities in the right order and how to prevent being side tracked. We`ll organize things first by importance and then by desired action. So just take a look at the points below and write your answers down - tr a piece of paper stuck on the fridge. Writing down your goal will help you visualise what you want to do and make you much more likely to achieve them. This is also very similar to creating a budget so you can use this same idea for all related items.

First things first - What do you need to take care of yourself right now. We`re starting from the ground up so we are only dealing with the essentials. How much money do you actually need, not what are you currently spending, to cover clothing, food, and shelter. The main thing here is to make sure that you cover your basic necessities of life.

The second area to look at - This is the list of items that you need to continue covering the basic necessities of life. The things that you put into this category are going to include things like transportation to work, work clothes, and other maintenance items. You also need to put money into savings in this category. Down the road you may end up using your savings to cover your basic necessities of life so don`t forget to add it in. This is where you put most of your extra spending when you`re making a budget.

The third `have some fun` part - This is going to be all the enjoyable extra stuff and add-ons. Thos that make life more enjoyable, but aren`t necessary from a practical perspective. This is where you put entertainment, dinners out, holidays, new mobile phone cost (beyond the minimum basic phone and basic plan),and any other stuff that you don`t need to stay alive or to keep your home.


Cutting Back On Your Outgoings

Once you`ve organized and prioritised your budget, put it all in order from most important down to least important. Now look at how much money you bring home per month. Now try to give yourself a small financial buffer (say £100 per month) to cover any minor changes and then start adding up all the items from top to bottom until you reach a total then compare that to how much you bring home. You have now created a budget that covers the most important things and will probably cover some of the nicer things a little bit. Now if your income is lower than the items you have added up then you need to look at squeezing down on your outgoings.

When it comes to people talking about `squeezing money` out of their budget, they are looking at all of the items that they have written down and going in and doing something to change their numbers for each item, where you can influence it. Firstly you now have to have a budget put together, so be honest with yourself and make sure that you spend your money on the most important things first and then work down the list. Reduce or remove areas that are not essential. This is where most people waste their money and then complain that they don`t make