Guide To Budgeting And Setting Financial Goals | Eric Finance

Household budgets have come under increasing pressure recently and there are many factors that have contributed to this. Some experts say that the cost of living is at an all-time high, taking into account wages are stagnating and some are even losing their job ? it?s easy to see why many a feeling the financial strain.

How Does Budgeting Help

- Allows you to analyse and monitor your spending, identifying potential money saving areas.
- Gives you a feeling of financial control which in turn eases stress.
- Allows you to plan your future, setting goals on a weekly or monthly basis.

How To Create A Budget

1. Gather all financial data
Collate documentation such as recent bank statements, bills, investment accounts and any other information that may show your outgoings or income. The more documents you can get your hands on, the better.

2. Calculate your average income
Using the banks statements and payslips take an average income ? ensure you take into account any benefits or secondary sources of income you may receive alongside your main salary.

3. Create a list of all your outgoings
Regular outgoings will include mortgage or rental payments, utilities, car or home insurance plus any subscriptions such as gym memberships, Sky TV, Broadband etc. Irregular outgoings will be fuel, groceries, clothing and entertainment.

4. Split expenses into fixed and variable
Fixed expenses include things that are deducted on a monthly basis such as mortgage or rent payments, car insurance, loan or credit card repayments, broadband, Sky TV and any other credit commitments. Variable outgoings include any expenses that vary in value and date. For many this will include fuel, groceries, clothing and gifts. It is important that you include even small outgoings that may seem insignificant to you.

5. Do the maths
Subtract your total monthly outgoings from your total income; the figure you are left with is known as your surplus income. If you are left with a positive number ?then that?s great, if it?s negative then you need to reassess your outgoings.

6. Reassess your outgoings
This is your first stop if you are looking to save money and reduce your total outgoings. Here are some specific areas to target:
- The grocery shop ? ?Downgrading? the price of the goods you are buying is a great way of saving money- the chances are you?ll be unable to see a difference in quality too. Always look out for offers and discounts as well; shopping online makes these offers much more identifiable.

- Fuel ? Fuel prices are at an all-time high meaning that you are probably spending a small fortune every month on filling up your car. Walking or using public transport whenever possible will reduce the amount of fuel you use; also carrying out basic car maintenance could improve the vehicles fuel efficiency by up to 10MPG.

- Entertainment ? Cutting down on nights out can save you literally ?100s a month. Look out for online voucher codes that offer discounts off food bills and drink at selected restaurants.

If your surplus income is quite high then you could look into paying off any credit card or loans that you may have, this will in turn reduce your total fixed outgoings and ease any financial pressure or stress you may have.

Setting Goals

Now that you?ve successfully assessed your spending and learn ways to reduce your outgoings it?s time to set some financial goals. Your goals will vary depending on your financial standing; here are some common short term and long term goals:
- Pay off credit card debt
- Build an emergency fund
- Save for retirement
- Buy a house

Frequently refreshing and altering your budget as and when your income and outgoings change will help you to reach your financial goals as quickly as possible.

This article was written by Jason Scott on behalf of UK Credit Guarantor Loans.

Source: http://www.ericfinance.com/guide-to-budgeting/

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