Saturday, November 2, 2013

Budget Your Home Finances Properly

Budgeting should be the first step a financial adviser takes when advising a client, however if you are not willing to pay for a professional adviser, you should still take the time to understand your situation and budget your home finances yourself.Budgeting is the process of looking at all your incomes and expenditures, and finding the difference between the two. This is so important as this can show you how much money you have available to save each month, or if you do not have enough money coming in to meet your needs.A simple spread sheet program is the easiest way to do this, but pen and paper with a calculator will do just fine but may take a little longer. This can seem a daunting task if you have never done it before but can actually be quite rewarding, especially if you find ways of cutting expenditures and start to see the amount of disposable income you have.On one side you need to list all your income. This can be salaries, any benefits or tax credits, as well as any other regular income you receive such as interest on savings. If you have regular overtime or bonuses these should be included but be careful if these are not guaranteed. You may want to make a sub heading for income that you can't rely on.Depending on your circumstances you may want to do these figures both net or gross. If your main income is salary then it will be easier to just work with your net income. However, if you have many different sources or are self-employed, it will probably be easier to use gross figures and then calculate the tax and other deductions at the top of the expenditure column.Expenditures are likely to be a longer list than incomes. Most large bills can be identified easily from your bank statements, but to get a complete view it is best to keep records for a month to account for everything you pay. Even small expenses can add up, so include as much as you can.To prioritize your expenditures it is normal to break them up into three groups. Essential expenditures are the priority bills, and this is important if you are struggling with meeting your payments. Essential expenditures are obviously items like your housing costs and utility bills. The next level is everyday spending, items which you really need like food and travel. The final section is discretionary spending which covers everything else like vacations, clothing, entertainment and dining out.The final task is to total both columns and determine the difference between the two. In doing this process, you will see obvious expenditures that your can cut out or reduce to improve your bottom line. Ultimately if you want your savings to be higher, you will have to either earn more or spend less, but at least you will now know where to start. Hopefully reading this article will help you in some way to budget your home finances.