Guest Post: 7 Reasons You Need A Personal Budget
So, what is a budget anyway and why do I need one? A budget isn’t just a piece of paper carried in that big red sandwich box that worried looking bloke waves about every March outside 11 Downing Street. The Budget is the Government’s best estimate of what they will receive in income for the year ahead – taxation, revenue, sale of signed photos etc – and what they intend spending it on – NHS, wars, salaries, new dart board for Dave’s office etc. In the same way, a personal budget will have a forecast of your year’s income and how you intend to spend or save it; this can very easily be done with accounting software now readily available on-line. Like the Government, you can include borrowings in your budget, but unlike them you can’t decide to “print” money to ease your financial troubles – well not legally anyway! Here are 7 reasons for making a personal budget.
1. Paying The Rent. Unless you still live with Mum and Dad, housing costs – whether rented or purchased with a mortgage – will probably be your largest regular expense. Unless, that is, you are addicted to chocolate in which case see below. It is a good idea to start with listing your main living expenses including fuel and Council Tax, Sky TV and other essentials so that you can then assess what you have left at your disposal for your other needs or aspirations.
2. Chocolate. If you do have a passion for chocolate or indeed any other luxury for that matter, having a budget will show you the areas of expenditure that you can economise on so that you can indulge your passions ad nausea. This advice is given only on the understanding that you are responsible for your own health and that the author cannot be held liable for any complications arising from excessive consumption.
3. Holidays. Home or Hawaii? A few people enjoy holidays at home, but if your ambition is to spend six months in California then your budget can help you reserve the cash to achieve it. If you know in advance how much you can spend on tickets and trips you can often pick up a bargain by advanced booking; or you could be in a position to make a spontaneous purchase when you spot a good deal and be confident that you will have the funds to cover it already in your holiday savings pot.
4. Food. In the intervals between clubbing and sleeping, most people eat food. This may be dispensed with but that is not a recommended plan for enjoying a longer life. If you are already aware of what you spend on food regularly it is easy to budget. If you are not aware, then you can take a stab at it and adjust the budget after a while to reflect how much you wish to spend and then shop accordingly.
5. Work. Unless you are lucky enough to be able to work from home, then you need to budget for travel to and from work, whether for bus or train fares or the cost of running your own car or bike. You may need to reserve funds for buying tools or clothes. Unless you are expert at charity-shop scavenging you could need to spend a bit on looking smart in the office. Especially true for the office-party when you need to impress someone you want to share your pencil with; or even your boss for that matter.
6. Christmas Is Coming! For many people Christmas is the time for giving and having a good time; and the rest of the year the time for remorse – especially after the afore mentioned office-party – and for scratching around trying to pay for it! You can set yourself a budget for presents and entertaining and, as long as you stick to that, the only headache you will have in the New Year will be a hangover and not a financial one. No longer will you have to wrap up a box of tissues for Granny’s gift, trying to convince yourself in doing so that it is the thought that counts and that she will forgive you for your spendthrift ways once again.
7. Play. You will need to know in advance whether you can afford that season ticket for your favourite team or will instead have to resort to standing on the touchline at the Rec. to get your sports fix. Perhaps you might want to start a new hobby or activity and to plan ahead for equipment purchases or memberships. Your budget will help you make those decisions wisely
You don’t have to keep your budget in a big red sandwich box, but it will be useful to have it to hand to see how well you are managing your finances and how much you will have left at the end of the year for shoes or chocolate. Accounting software will provide you with an easily accessible reference and a method of budgeting to enable you, and not your bank, to have control of your finances!