At a loss as to where all your money is going? And feel ill prepared for financial mishaps? By budgeting you’ll know exactly how much money you have to spend. A tighter grip on your finances means less worrying about possible unexpected bills coming in. You’ll be able to purchase things without an instant guilty feeling in your stomach. Our advice to anyone, wealthy or not, is to learn how to budget. In this article we’ll explain what budgeting is and how to start doing it!
What is budgeting? Budgeting is managing your expenses according to your income.
Budgeting is often mentioned in the same breath as estimating. However, when estimating you gain insight into your income and expenses, whereas budgeting is all about setting goals. The aim of budgeting is to gain insight and control your expenses.
With knowing what you’re spending your money on might also come the sensation that you actually have enough money. But when budgeting it’s important to record what you’re spending your money on and to set goals for yourself accordingly.
Looking for an app to help you with your budget? Download Dyme.
Budgeting can be very personal. Every day you, and only you, decide what you spend your money on.
Deciding to go for a certain type of apple is an example of a financial decision you’ve made. However, your choice can differ every week. Some expenses are the same every month, whereas others might only occur several times a year. May we also remind you of the month december? The most expensive month of the year for most of us. Whereas other months your income might be more, like the month in which you receive your holiday bonus.
Budgeting means more insight, which leads to better informed decisions when gauging whether you have financial leeway or not.
Has budgeting made you realise how much you’re spending on groceries? You now know that’s the area to start making smarter choices in. Budgeting can also warn you for a tight month ahead. So you can financially prepare the months before. Budgeting can be insightful for your household too. You’ll find out whose money is going where every month.
Budgeting step-by-step
- Decide how you are going to record your budgeting
- Check when and how much money comes in
- Set a monthly budget
- Set a monthly budget for variable expenses
- Set a weekly budget for variable expenses
- Save up money for your variable expenses
- Add up what you’re left with
- Try to stick to your budget
- Read a couple of budgeting tips
The most old school way to record your expenses is by using pen and paper. However this is not necessarily the easiest way.
Excel is a very useful programme to record your expenses. Budgeting by using Excel also means you can add up all your expenses and income sources by the press of one key.
Both options mean you have to delve into your bank statements to trace all your expenses and your income. To make budgeting easier, you could use our app. We’ll place your income and expenses in an overview for you. Budgeting couldn’t be easier!
Is your salary paid monthly? Easy, know you know what your income is. However, many of us aren’t paid as regularly as that. Reason being that we’re in flexible jobs or because we have multiple jobs.Try to figure out the total sum you earn a month and record the dates on which the money is added to your account. Don’t just record salary, also consider tax returns and a holiday bonus.
In a monthly budget you record what is subtracted and when. Look out for the following in your bank statements: courses you might take, your mortgage or rent and subscriptions. Allow some room for your variable expenses, such as groceries. You’ll be filling this in in the next step.
By going over your variable expenses, you can estimate how much you’re spending in total a month. You can also decide if you’d like to spend less on certain things, such as groceries or going out to dinner. So in short: set spending goals per debit entry.
Carefully review whether it’s possible to spend less money on something. You can easily cut back on what you spend on birthdays, whereas travel expenses are hard to reduce.
You’ve now decided what you’d like to spend per debit entry a month. But this might feel a little abstract. What does spending 250 euros a month on going out actually mean? Break your budget down into a weekly budget for more insight. Knowing you have 60 euros a week to spend on going out is more precise.
Find out how much you can save on your variable expenses
You’ve now recorded your regular variable expenses, but what about the thing you spend money on a couple of times a year? Trace these expenses, such as gifts, a visit to the hairdresser or a bike repair, and write down how much you want to save every month for these types of expenses.
Now you’ve added up everything, the fun part starts: checking how much you’re left with every month! The smartest thing to do is transfer what you’re left with to a savings account. You can spend it later on to repair a broken washing machine or, even better, on a well deserved holiday.
It’s relatively easy to set yourself a budget, the hard part is sticking to it. Luckily, the more aware you are of your financial situation due to budgeting, the more likely you are to stick to your budget!
Apart from this step-by-step guide we have gathered a few other pointers for you when it comes to budgeting. Check out our article on 10 ways to save on energy costs.
If you want to learn how to budget and practice your Dutch at the same time, you can download an e-book on the Nibud (the Dutch National Institute for Budget information) website. It’s called the Nibud method for budgeting (Nibud Methode voor Budgetteren). It includes useful references and examples of year and month budgets. If you’d like to learn even more about budgeting. You could consider following a course on budgeting.
Livia Spies
