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We’ve worked out our income and fixed expenses, we know how much disposable income we’re left with and we’ve worked out how much of that needs to be allocated to variable expenses.
We’ve also worked out what we need to set aside for sinking funds, and how much (if anything) is left over that we can transfer to savings.
So what next? Well theoretically all the above is great, if that’s what happens in reality!
We need to monitor our budget to ensure that it does.
1. Tracking Your Variable Spends
Personally I have starting withdrawing the cash for my variable budgets and using the cash envelope system (which I will write about in a future post). But if you prefer not to use cash you need to find a method for recording your spends, so you know how much money you have left in each category so you don’t overspend.
You can simply write it down in a notebook and calculate a cumulative balance each time you spend:
|Week 1 – Social|
|10/08/18||Coffee with friends||-£6.30||£43.70|
Or, if you prefer you could use an app – I downloaded an app called ‘Pennies’ which allows you to create ‘pots’ and you can add in your spends and it’ll calculate what’s left for you.
Whichever way, you need to track what you’re spending in each category.
2. Checking Your Bank Account
Decide when and how often you’re going to check your account. I do this daily, but you could do this weekly. Tick off your budgeted expenses as they happen. This will highlight if any unexpected payments leave your account, which will allow you to adjust your budget if required. Or if you’ve over/underbudgeted for something.
Learn from any mistakes this month and tweak next months budget. As time goes on your budget will become more and more accurate, and checking your accounts/tracking your spends will become second nature.
3. Monthly Review
This isn’t strictly necessary but it can be helpful. What went well this month? Were any expenses unexpected or more than budgeted for? Did you budget too much for food shopping and can you cut this next month? Regularly reviewing and maintaining your budget ensures it stays efficient and effective.
I hope you’ve found this helpful, like I’ve said previously, this is how I do it and I find it works well for me. There are many different ways to budget, you need to find what works best for you and your household.