How to Budget in Three Simple Steps

As an entrepreneur, there are probably few things that you love more than making money. You’ll have an in-depth knowledge of profit margins, and know every trick in the book for increasing your takings without bolstering your outgoings too.

As an entrepreneur, there are probably few things that you love more than making money. You’ll have an in-depth knowledge of profit margins, and know every trick in the book for increasing your takings without bolstering your outgoings too.

It’s surprising, then, to realise how few entrepreneurs are good at saving for domestic purposes. It’s true that you should be able to enjoy the money you make, but like running a business, households need to be able to balance the books. When spending spirals, the picture becomes distinctly unhealthy, and it’s important to put a stop to a plummeting bank account before it’s too late.

How to budget well
photo credit: slightly everything / Flickr

Budgeting offers the perfect solution. Here’s how to do it in three easy steps…

Step One: Work Out Where Your Money is Going

The first step to successfully budgeting is to work out where your money is going. Although they may be minor expenses, smoking, going out socially, hobbies, and interests can all add up, and we often fail to realise just how much we’re spending.

The best way to open your eyes to your expenditure is by sitting down and drawing up a good old-fashioned list. Using your receipts and bank statements, write down everything that you’ve spent over the course of the last month. This will help you to work out exactly what you’re splashing the cash on.

Step Two: Circle Your Necessary Expenses

The next step is to take a look at your list, and identify what you can and can’t do without going forwards. There will be some costs that you simply can’t quibble over: your mortgage payments, debt repayments, utility bills, and so on. However, you’ll soon find that there are an awful lot of areas where you can save money.

Using a green pen and a red, circle your necessary payments and your unnecessary payments – these will offer you a great place to start looking at where you can save some money.

Household budgeting

Step Three: Draw Up a Budget

Once you have a good idea of where your money is going, it’s time to draw up a budget. This is nice and simple to do. To start, write down your monthly income. Once you have this, add together your necessary expenses and see what you get. Subtract the latter figure from the former and then take a look at what’s left over: this is how much you have to spend on luxuries (all of those items in red).

If you like, you can take this a step further, and minus any amount that you’d like to put into savings, leaving you a bare minimum to splash each month.

Improve your budgeting today by following these three simple steps.