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Working to a Budget

Introduction

Budgeting, (the process of managing outgoings so that they do not exceed income), gives an accurate picture of your financial position. A well organised budget can highlight non-priority spending and should also highlight changes that you can make in your spending habits thereby enabling you to save money.

Budgeting also helps to make your money go further. The aim of budgeting is to ensure that you have the funds to pay your basic living expenses and hopefully it will assist you in achieving a debt free state.

If you take time to think about this, living on a budget could mean that you could choose to spend, or not spend, all your "available" resources every month, and not get into debt. Surely staying out of debt is something everyone would like to be able to do.

A well planned budget can help you avoid impulse buying and can help you avoid getting into so much debt that you are no longer able to meet your contractual obligations. Working to a budget will also help to reduce the stress levels associated with being in debt.

Living to a pre-defined budget is not that difficult, it means you can use credit cards, you can write cheques, you can have cash in your pocket, so long as you work out your income, your priority payments; rent, electricity, etc. and keep track of what you are spending so that you can be in control and stop when it proves necessary to do so. The easiest way to keep track is to use a simple budgeting program and/or attend a course on money management, see below.

Free Money Skills Workshop information. (PDF File)

As the above information is in PDF format you will need Acrobat Reader, if you do not have a copy you can download one from this site.

Further information and latest workshop dates can be obtained on scmoneyline.org

Budgeting Programs

There are a number of good money management programs on the market, and from my experience no one program is "The Best". Usually the one you first learn to use is the one you will stick with, the following are all worth the initial outlay:

I have used Moneysoft Money Manager since it's inception for computer use in 1985, however, my understanding from research is that Microsoft Money and Personal Accounts Home Edition also do an excellent job and that you can soon learn to keep track of your money, whichever one you choose to use.

This site has a budget planner that operates in Microsoft Excell, it is of American origin and was initially designed to operate in dollars($), but there is now a pounds(£) version available. At $9.95, downloadable immediately on payment of the fee, it could prove to be a good investment for those people who do not relish paying for one of the above Money Management programs.

I have not tried this program, but reading the information available and looking at the free demo, (not usable I'm afraid), it would appear to be a reasonable option for those people with access to Excell.

Here are some comments I found about using a Money Management program:

This was my first ever personal finance program. It really does help to sort your life out.
Each month, my bills and so forth are automatically entered, (once I'd set the program up), so that I can immediately see how much money I have left to spend for the month.
Every few days I enter my wallet of receipts so I always have an accurate record of my bank account.
Once a month, when I get my statement I "reconcile" the account by spending a few minutes going through the statement and ticking off entries in the program, it then reports any discrepancies between my bank statement and my data.
I can even "hide" a few pounds from myself each month in order to give myself a safety buffer by putting the money in a savings account.
I can produce reports to see where my money ACTUALLY goes.
I even use it to hide a few pounds each month to pay for my Christmas Shopping
Quite simply, a budgeting program is worth it´s weight in gold for anyone who has a bank account.

It is sensible to budget your money by using a good budgeting program, you can see your financial status before you get into debt. I know at the beginning of the month whether I am on a "tight" budget or if I can go on a "spending spree", or preferably put a little extra aside for holidays, special purchases, or that "rainy day" which unfortunately comes to us all at some stage.

Money Manager

Below is the basic layout of a Money Management program. Note the savings for car expenses and holidays, these are coded s1 to s4, the codes allow you to call up a summary showing your savings to date in each area:

The summary below shows how much has been saved for January and February and as you proceed through the year you can adjust the amount you are saving up or down as you become more aware of what you will need to cover that area of expenditure.

There are loads of tools in these programs that will enable you to manage your money and hopefully keep yourself out of debt.

Sensible budgetting is the road to financial success, ignore it at your peril. Bad debt arises from poor or no budgeting and bad debts have to be repaid by someone, unfortunately it is frequently those who do not run up bad debts who end up having to pay back the thoughtless borrowing of others.

Updated: 08-07-2008 Contact Us | Top | Home |