Creating a budget is a great way to manage your finances and ensure that you're spending within your means.
The first step in making a budget is to calculate your total income (including your salary, bonuses, commissions and all other income sources, like rental income).
You should then deduct any expenses. It is a good idea to track your expenses for a few months to get an idea of where your money is going. This will help you identify areas where you can cut back and reduce expenses. It is also a good idea to categorise your expenses into fixed expenses (eg recurring expenses like rent, mortgage or car payments) and variable expenses (like eating out and entertainment costs). Fixed expenses may also be called ‘priority debts’.
To help yourself budget, it is a good idea to set financial goals. These include things like paying off a debt, saving for a house deposit or building an emergency fund. Consider dividing your income between your expenses and financial goals. You should generally prioritise your fixed expenses and financial goals, before allocating remaining income to your variable expenses.
To help yourself stick to your budget, monitor your expenses and income on a rolling basis. Make adjustments as needed and be mindful of overspending in any particular category. You may find that using a budgeting tool (eg the budgeting tool offered by National Debtline) can help you track and monitor your spending.