Budget Plans - A Guide To Budgeting Your Finance

When determining your financial health, it is important to look at several factors. To start, you want to determine what your income is versus the amount of money that you pay out. The process of determining this balance is called budgeting, and it is an essential part of becoming financially stable. Knowing how much money you make and how much debt and financial responsibility you have will help you determine where you stand in terms of your financial health. Budgeting can be difficult to do, so here are a few points to consider when sitting down to map out your finances.

To begin, you need to have your finances broken out into categories. Few budgets are similar, but we all follow some very basic characteristics when it comes to how we spend our money. There are 5 main categories that you can break your budget into, and just about all budgets follow these:

  1. Food
    Everyone needs to eat, so it is pretty clear that you need to budget how you are planning to spend money on food. Break this down by the same interval in which you are paid. If you get paid monthly, then budget your food on a monthly basis, likewise for a weekly paycheck.
  2. Shelter
    Also a necessity, shelter can include several other subcategories besides just your rent or mortgage. Utility payments such as heat, electricity and water are pretty standard, but you can also include your telephone, cable or internet in this segment of your budget. These bills all usually fall on a monthly time schedule.
  3. Transportation
    This can mean many different things to each of us. Some don’t own a car but travel to and from via public transportation. No matter how you get to and from where you need to go, chances are you have to pay for it, so include it in your budget.
  4. Debt
    This may be the only category that can be done away with, but only a fortunate and select few can do so. The majority of the U.K. holds some kind of debt, whether it is on a loan or in the form of consumer credit. This part of your budget should have special attention paid to it. If you ignore your debt, you can do great harm to your credit history, which will hinder you from getting credit in the future. Damaged credit will also show up when you go to apply for a job or an apartment, as credit checks are fairly common when these transactions are made.
  5. Discretionary
    This category can really include anything you want it to. Every consumer is sure to have a unique definition of what discretionary spending is. Hobbies, entertainment and even saving and investing are all considered discretionary portions of the average budget. They are not necessities, required to lead a normal life, but they do add pleasure and enjoyment to your life.

Budgeting is a simple task, and it can really help you keep your finger on the pulse of your financial health. Sticking to a budget may be a little harder to do, but you won’t have a chance to do so unless you sit down and compile one in the first place. Why not sit down today and compile your very own budget, tailored to your financial needs.