We can often try to make a budget to stick to when we feel that we need to be more careful with our money. We might realise that we are overspending or struggling to makes ends meet as pay day comes near. Otherwise it could be that we want more money to repay a loan or to increase our savings. This is something which can be tricky to do unless you have some sort of target. To set a spending target can be a good way to do it. However, it can be tricky to set a precise one.
Why it is tricky
The main reason that this is tricky is because are finances are not always the same. If we always got exactly the same income and paid out exactly the same, then it would be a lot easier. However, our incomes may vary, perhaps due to us working different shifts, sometimes doing overtime, months having different numbers of working days and things like that. Then we do not always pay out exactly the same either. We will have a higher electricity and gas bill in the winter, we might have some bills that come quarterly, six monthly or annually, and we might have extra gifts and other things that we buy on the odd occasion. This means that even for the simplest of things, it can be difficult to set a precise budget.
What to do
Perhaps the closest thing you can do is to calculate the average spend per month. You could work out how much you spend on each thing and then divide it by twelve to get a monthly budget and then add them up. However, if one month is much dearer than another it will mean that you will not have enough money to cover all of the costs.
You therefore have a few options. You could take the most expensive month and budget that much every month so that you are sure that you have enough. Alternatively, you can budget different amounts for different months. The first idea is probably simpler and easier, but if the budget is higher than your income, then it could be problematic. It might be better to budget the most expensive amount each month and on the months that you need less money you put the spare into a savings account and then you will be able to build up your savings to help cover those months when you have an extra lot to spend. Having the discipline to save can be tricky though. It is wise to make sure that you have a special account to do this and really work hard on making sure that you do stick to it.
How to be flexible
Some people like to be very precise in their plans and find it difficult to change them. If you need to be flexible with regards to your budget and how much you spend and save then this can be tricky for some people. If you have a pattern where certain months of the year are always dearer then maybe you could set a year by year budget rather than a monthly one. So, if every December you have a larger budget and a lower one in March (for example) this could help you to still see a pattern and order to things.
For some people being too flexible is the problem. They are so flexible with their spending that they end up spending more than they can afford every time that they buy things. Writing down the budget for each month can be helpful. Also, if you know you are in a month where you will have money left over, put some into your savings account before you have a chance to spend it. Then you will make sure that it is there. You can always get some back out again, if you need it for an emergency purchase, but hopefully you will be a lot less likely to spend it if it is there.
It is also worth reviewing your budget every so often. There will be circumstances when your situation changes and you will need to make sure that you are prepared for that. It might be that your job changes and there are therefore changes to your income. It may also be that your expenses change. We will normally find that, due to inflation, that we will spend more money year on year, but that might not always be true. It will depend on our individual circumstances.
So, setting a very precise budget can actually eb difficult. However, it is so important to make sure that you are able to cover the costs of everything that you need to buy. So even if you have a flexible budget or no budget at all, you will still need a plan to make sure that you will be able to cover the costs of everything that you need to buy.