For many of us, the word ‘budget’ is enough to send a shiver down the spine.

Sitting down and genuinely assessing our finances, going through transactions and working out our financial position can be an intimidating prospect.
But we’re thinking about it the wrong way!

A budget isn’t a prison sentence or a chore, it’s a tool. An easy, effective tool for improving your financial wellness and taking control over your life.

And most importantly, it’s a tool that enables you to buy those things you always thought were out of reach – and buy them without a sense of guilt or shame about racking up debt.

So here are five simple steps to putting together a budget and making it work for you:

Step One: Set a goal

This might seem like a strange place to start, but it’s important to keep you motivated to finish the project. If you are in debt, or discovering you are, it’s too easy to put things in the too-hard basket – but if you have a clear goal in mind there’s a destination you can keep heading toward.

Step Two: Record your expenses

Look through your bank or credit card statements and record your regularly occurring expenses – start with things that are regular, consistent necessities, like rent or mortgage payments, gas and electricity bills and phone bills.

Then, look back at your grocery spending for the four most recent grocery shops – add them up and divide by four to find a rough average of the amount you spend on groceries each time you shop.

Lastly, look at your other spending that doesn’t fit into the ‘necessity’ category. This is your discretionary spending and the easiest thing to cut back!

Step Three: Record your income and decide on a budget time frame

Look at your regular income stream, which for most people will be a regular pay day in the form of a lump sum.

While many use their pay period as a template for their budget (i.e. a monthly budget if you get paid monthly), find works best for you.

If you get paid monthly but prefer to think in terms of weekly spending, set your budget up like that.

It’s all about making your budget work for you and with you.

Step Four: Set up a regular savings payment

Now you know what you can afford to save each week, set up a regular payment or transfer to an account to ensure that money is effectively saved. You’ll be surprised how quickly time passes and how quickly your goals seem achievable!

Step Five: Make it a living document

Just getting over the hurdle of doing a budget can be an achievement enough, but it’s important to review it regularly. Keep updating the budget as you go, track every transaction you make – and you’ll soon find it much easier to stick to the plan, pay off your debt, take control of your life – and treat yourself!