Budgeting

A budget is an extremely useful tool which can help you control your financial situation. Many people who get into problems with debt or overspending do so at least partly through not fully understanding where their money is going. By using budgeting techniques you can get a clear picture of exactly what you spend your money on, and take action to adjust that balance if it is not what you want to be doing. In other words, it is not about stopping all expenditure, but rather choosing what you spend your money on and making sure you have money free for the things you really want.

Working to a budget really should not mean permanent thrift and misery; it is about understanding and control, and the end result should be that you have more money to spend. The difference an effective budget can make is enormous, and it really is largely about getting a clear understanding of where all your money goes to, so that you can make sure that matches up with the amount you have coming in.

If you buy a coffee once or twice a day, it costs very little each day, so you don't even think about it. However, if you add that up and work out how much that is every month and every year, it becomes a substantial amount of money, which you may well decide you would rather do something else with. If you buy lunch every day at work, would you really rather do that than bring something from home and have an extra holiday each year? It really does make that much difference and most people are making these sort of choices on a daily basis without knowing it.

So understanding that a budget can be a useful thing is a bit of a no-brainer, but then comes the part where many people fall down - doing something about it. Understandably, a lot of people do not get started down the budgeting route simply through a lack of understanding of how to go about it. There are various options you can consider, but in essence what you need to find is a system you can follow that gives you an easy way to keep track of where your money is going. If you are reasonably comfortable with figures and spreadsheets, you can do this completely from scratch. You can download free budget sheets online to get you started.

The problem is that unless you are very determined, it does not take much to be put off following the whole process through and putting in the work that is required to prepare your own budget manually. The alternative is to use some sort of budgeting tool, of which there are many on the market. The reason these are so popular is that they take all the hard work out of budgeting and mean that you only need spend a small amount of time keeping track of your finances. Keeping the process as simple as possible is actually quite an important factor in determining whether people put the budget into action and stick to it or not.

Even with a budgeting tool, you will need to spend some time initially inputting all your financial information so that you can come up with your monthly budget. Once that work is done, however, the all important monitoring and updating is so much easier with a budgeting software tool. Some packages will even pull your online bank statements into the system so that all your financial information is integrated in one place. One of the most useful aspects of a good budget tool should be the reporting function. This is where you are able to really analyse your spending, to show you in a clear and simple way where exactly your money goes, where spending is out of control and which areas require your attention.