I know you've heard it time and time again, in order to manage your finances you need a budget. Everybody knows this is true and still not everybody budgets, knows how budget or knows exactly where to start.

First things first, a budget is a tool it can be as simple or as complex as you want it to be but the end result is the same. It takes away the guess work, eliminates the worry and puts you in control of your money.

I've seen people shudder and sometimes run for the door at the sound of the word Budget and yet their finances are in a shambles. The amount of effort needed to set up and maintain a budget is minimal which is why it is so surprising to see so many people go to great lengths to avoid doing it. Once put into place, the rewards of being able to predict whether or not you can afford your latest desire (without worrying about it after the purchase) are considerable.

The steps to setting up a basic budget are as follows:

Step 1.

Decide which type of budget fits best with your situation.

" Weekly

" Fortnightly

" Monthly

If you receive most of your income on a monthly basis it may be easier to set up a monthly budget. If you receive other income on a weekly/fortnightly basis, you will have to calculate what it would be on a monthly basis in order for the budget to work correctly.
E.g: Weekly amount x 52 / 12 the result is your monthly income from that source.

Step 2

Calculate your Total income from all sources.

Step 3

List all of your expenses (everything that you spend your money on) and total it.

Step 4

Deduct your Expenses from your income, don't panic! This isn't the time to go into shock or to tear up the sheet and go into denial; it is time to take action. Think about it you can now see exactly how you stand financially as scary as it may be, all hope is not lost. You have the opportunity to take charge and gain control of your finances possibly for the first time!!

Step 5

Time to be brutally honest:

• How many of the things on your list are an absolute necessity?

• How many things can be modified?

You don't need to cut out everything in one fell swoop, that sort of change would be too drastic although in some situations, it could very well be necessary.

This is where you need to take stock of your spending and evaluate the things on your list. See which items could be modified to some degree. It won't make a noticeable difference to your lifestyle but it can be surprising how even the slightest change could have quite a dramatic effect on your budget.

After a few (hopefully minor) adjustments, you now have your new Budget sitting in front of you, you have worked hard on it and are absolutely astounded by the results of your efforts, you can see that although at the outset, things were looking pretty grim, you now have a plan in place that is workable and accurate. You can see where you are going and how you are going to get there so what's next?

Step 6

You MUST adhere to it! Update your budget as you spend your money, no matter how small the amount, include it, EVERYTHING needs to be accounted for.

For more information, useful tips and advice go to: Building a Budget

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