Good budgeting now lays the foundations for financial success in the future.
Budgeting is probably not what you want to do with the salary you get from your first job. However, it is the one sure way to create opportunities to meet financial goals and ensure that you have the resources to get what you want from your life, professional or otherwise. A realistic budget can be difficult to do if you don’t have a lot of experience with it – there are a number of key components.
Establish your income
The salary figure in the contract may have seemed impressive but it’s only when you get that first pay cheque that you’ll really see how much you’re going to get every month. Taxes, student loan repayment, benefits or pension contributions could all be taken out before you get paid. So, wait until you have that first payment so that you have an exact figure to work with.
Work out your basic expenses
These are the expenses that you can’t skip. So, rent or mortgage payments, utilities bills, food, transport, mobile phone and internet could all be included in your list. Prioritise paying these before you allocate the cash you have to anything else. Where possible, make these payments once a month, as opposed to annually or quarterly – this will give you a regular, lower figure to work with. Fully grasping your basic expenses is essential if you don’t want to run out of money before the end of the month – that’s a sure route to getting a poor credit score and being in a situation where you need to find loans for people with bad credit or even no credit check loans.
Identify the potential irregular expenses
These are the costs that you don’t need to survive on a day-to-day basis but which could throw your finances into disarray if not accounted for somewhere in your budgeting. If you have a car then insurance and the annual MOT could fall into this category. Life insurance, pet insurance, school fees, subscriptions, home repairs, office supplies, medical expenses and personal care costs, such as haircuts could all be considered “irregular.”
Work out what you’re putting aside
Saving at this stage may seem to be a waste of resources – retirement can feel like a lifetime away when you’ve only just started a new job. However, the earlier you start to save the more you’ll be able to generate and the easier it will be to enjoy life in the future. At this stage budgeting to put 5 – 10% of your earnings aside into a pension or savings will help you start to build a future.
Monitor and track what you spend
For budgeting to be realistic it needs to work with your “real world” figures. Monitoring and tracking your income and spending will give you a good idea of whether the budget you’ve set is realistic or whether you need to make some adjustments. This may be a case of sitting down with pen, paper and receipts once a week to work out where you are. Alternatively, there are many different budgeting apps that will track your outgoings and analyse where most of your income goes. Once you know what you’re spending you can make adjustments to ensure that you’re using the cash you have in the way that you want.
