A budget, a plan listing expected expenditures and incomings over a set period of time, is a short term financial plan but over time it accumulates into a cash flow, a longer term financial plan.

Steps involved in creating a budget

Step 1. Identify and list all of your incomings

These might include earned or unearned income including benefits, wages, interest on savings and investments, income from rental property, dividends and so on. Separating regular income from irregular income can make creating a budget easier. Make sure these are accurate, if needed check payslips, cheques and other documents you might have and write down the exact amount of income you have coming in each month.

Step 2. Identify and list all your outgoings

Make a list of all your expenses including holidays, groceries, petrol anything that you spend on. It might be useful to use bills and other documents to accurately list all your expenses, from mandatory expenditures to essential and discretionary.

Step 3. Allocate a time period that you want to cover

This might be a month to even a year. Make sure your budget is not too strict and allows for some flexibility in case of emergencies. If you find it hard to plan for longer periods of time you might find it useful to create a budget with the length of time you have between receiving your salary.

Step 4. Calculate the total incomings and outgoing you receive and spend during each time period

One you completed your budget check whether the end result is positive (surplus) or negative (deficit). If you find that the end result is a deficit find out why, are you overspending on an item of expenditure, if that’s the case try to reduce your expenses, but if there’s no way you could reduce your expenditure try to find a way to increase your income for example, work extra hours or get a second job.

Check out my YouTube videos on budgeting!

• Instagram
• YouTube
• Facebook

steps in budgeting

thefinancialfreedomguide