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How to Budget to Make the Most of Your Money

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Budgeting is the best way to make the most of your money. If you're paid monthly and you don't budget well, you might end up with no cash before payday. With simple tools like Excel you can make the most of your money. If you download the free version of Microsoft's spreadsheet program, you'll get most of its useful functions without spending any dollars. That's a tick in the box for your budget before you've even started. There are other online tools you can use to create a budget that make your income and expenses easy to figure out.

Stick to a Budget

If you're saving for something, using a planner will help you achieve your aim quicker because it will help you identify what your money is being spent on. The downside is that monthly budget planners only account for the household bills so annual expenses like car servicing, a family holiday and of course Christmas time aren't covered. Similarly, the amount you spend each day on take-out coffee or lunch at work will also escape the glare of the budget planner. But it's still worth doing.

Free Online Budget Planners

If you don't have any Excel skills, you might want to use an online budget planner to get a handle on your cash. These are often simple databases that allow you to calculate your income and expenses. You'll find them on websites for banks, mortgage lenders, and other financial institutes. They tend to walk you through the process asking for certain data before you can move onto the next stage. You'll need to know what you pay for household bills, your insurance premiums, and other financial commitments like your cell phone charges and your monthly car repayment. You'll also need to have an idea of how much you spend on essentials like gas, groceries and medical supplies. Have in mind how much you're putting aside each month for your retirement, investments and an emergency fund too.

Planning for the Future or Now?

Are you planning for the future or for now? Are you trying to make your monthly money work better for you or do you have financial goals? It's good to do both as figuring out short-term, medium-term and long-term financial goals will give you something to aim at and give you a sense of achievement assuming you reach your goals. A short-term goal could be to live within your means or it could be something more ambitious like paying off a car loan earlier than expected. A medium-term goal could be geared towards your home and putting money aside for repair or to pay off the mortgage early, while a long-term goal could be early retirement.

Working Out an Average

You can get your monthly household payments from your bank statement. The charges for household bills don't change very often so you know where you stand with them but the same isn't true for your groceries. To work out how much you spend on groceries gather up the receipts for the past three months, or get the information from your bank statement, and then divide that by three to work out the average. You should do the same with receipts from buying gas and any other essentials.

You're in the Green

If your budget planning shows that you spend less than you earn, that's great but don't take your foot off the gas and enjoy yourself too much or you might end up in the red again. A common mistake people make is to sort out their finances but not change their spending habits. That's like losing loads of weight from a diet and then going back to eating the junk that made you overweight in the first place. Learn from your mistakes and don't over commit yourself financially. Spending less than you earn will bring a little happiness because it'll make your life less stressful.

You're in the Red

You might not be surprised to end up with this result but don't let it upset you. with a budget planner, you'll know where your money is being spent. Be ruthless and remove anything you can in order to get out of the red. Don't be silly and decide not to buy new clothes or to eat the same meals each day, you need some happiness. Cutting out waste is the best way of saving money without sacrificing. Making sure lights are switched off when you leave the room and your heating is off when nobody's home are a couple of ways you can cut back without losing out. Wasting food and paying penalty fees for late payments are two other ways that money is needlessly wasted.