We all want to manage our money well. The majority of us have found ourselves overspending, underearning or experiencing other incidents that result in financial difficulties and financial hardship, so know exactly how it feels to struggle for cash. Now, there’s one key step that can help everyone to manage their money in their lives. This is a budget. At the end of the day, no matter who you are and no matter how much or how little you earn, you are going to need a budget. Creating a budget is a skill that should be taught in schools, as effective money management is an essential life skill. However, it isn’t and as a result, many people enter adulthood without knowing how to manage their money properly. It’s a skill that you have to pick up yourself and we’re here to help you get along with it. So, if you’re not living to a budget yet, take the following advice into account and fix up your finances!
Work Out Your Total Income After Tax
The first essential step to take when it comes to creating a budget is to ensure that you know how much money you have available to you on a monthly basis. This will help you to get to know what you’re working with and what kind of lifestyle you can lead. A big mistake that many people make is to assume that the salary they see written down on their work contract is the amount that they have available to spend throughout the year. At the end of the day, this isn’t true, as we are all subject to taxes and other essential contributions to the state, such as national insurance payments. You need to deduct these costs from the sum of your salary to determine how much you actually take home each month. Of course, this isn’t a set figure for everyone. The amount of tax you have to pay will depend on which tax bracket you fall into. You can use an accountant like MNE to help you with this and to ensure that you pay the right amount. This will prevent you from getting in trouble for tax evasion.
Covering the Necessities
Once you’ve got the figure that you take home each month, it’s important that you then deduct the costs of any necessities in your life. Everyone can cut corners to save money, but at the end of the day, there are outgoings that the majority find themselves having to pay. Some common examples of essential costs include:
- Rent or mortgage payments
- Council tax
There are other costs and contracts that you may have to pay too. These can include things like a car and car insurance to be able to get to your job. It could be internet to be able to work from home. It could be a phone to keep in touch with others. It could be outstanding credit card minimum payments, loan payments or other finance payments that you are contracted to pay. Make sure to include these costs in your essential outgoings too.
Once you’ve figured all of the above out, you should have a figure remaining. This figure is your disposable income and it is the money that you can freely spend on whatever you wish. Avoid exceeding this figure and your finances should always stay in check!