Many people can be put off budgeting because it means that they will have to go without everything that they enjoy. It is not surprising that they think this as it can conjure up images in the mind of sitting in a cold dark house with just a small tin of soup to eat each day. Thankfully, budgeting does not mean this at all.

What is budgeting?


Budgeting is where we allocate funds for certain purposes. It is as simple as that. So, when we get paid or get money coming in, we can make sure that there is enough to pay everything that we need by allocating funds for different things. What we decide to do will depend on what we need to pay for and the types of things that we want. It does not necessarily mean cutting out all luxuries but it will depend on what goals you set yourself.

People will budget for a variety of reasons. It might be that they are struggling to cover all of their costs and so need a way to make that easier. It might be that they want to free up some money to repay a bad credit loan or save up for something. There could be all sorts of reasons. It is worth keeping in mind the reason that you are budgeting though as this will allow you to keep motivated to make whatever changes that you feel are necessary.

How to make budgeting suit you


When you decide how to budget it is worth making a plan which suits you and your lifestyle. You will need to start by knowing how much money you always have coming in. Then you will need to work out what items you have to pay for. This will be loan repayments, rent, food, utilities, contracts and everything that you pay regularly. Then you will be able to calculate what you have left. It will be up to you to decide how you allocate this money. This is the money that you could choose to spend on luxuries or whatever you want. You will need to cut back in some areas but it is up to you to choose where you will do this. You can try to pay less for your essentials as well and this will leave more money to put towards your luxury items. If you compare prices on all things that you buy, you could find that you will be able to save some money by switching to different suppliers or retailers and hardly notice any difference or put in much effort but have more money available.

How to choose where to spend money


It can be tricky knowing how to allocate your money. Once you have decided on what is essential and put money aside for that you should have money left over. This is what you will need to use to spend on all of your luxury items. It is worth prioritising your spending so that it is easier to decide. For example, you might not want to give up your Saturday nights out but you might be prepared to take coffee to work rather than buying it on the way. In order to prioritise, you will need an idea of where your money is going. Therefore, if you look at your bank statement you will be able to note down all of the things you are spending money on. You may also need to look at your credit card statement. If you use a lot of cash then you will have to remember what you are spending and this could be more difficult. However, you could always take the time to write down what you are buying and how much you are spending as you do it and then you will have the information that you need. It is then up to you to decide how you will allocate your money. Think about whether you want to decide on how much you will spend on each area (such as going out, hobbies, DVDs etc) or whether you want a weekly budget to spend as you wish each week. It is good to think about what might work out the best. Also consider what you might do if you want something more expensive, such as a holiday that you cannot afford in a month. Will you save a bit up each month towards it? If you do this then where will the money be taken from, which part of your budget will it come from? Be flexible though and if the system you use does not work, then you can change it to suit you later. Your needs will change as well as your priorities so make sure that you leave room for that. Do not think you have failed if you change the system, it is important to be adaptable for it to work for you.