Pen and Paper Method Continued

Step 3
Make a list on the right side of the page of all of your actual expenses (and I mean everything that you spend your money on each month.) If you are uncertain of the amounts you could go through your previous bills. (Remember to amend them according to the type of budget you are creating)
NB: if you intend to add a column for miscellaneous items, please, please, please (I cannot stress this enough) make sure that you itemize them, don’t just bunch everything together. The miscellaneous column tends to get bigger and bigger; it can be just as bad as not having a budget not to mention it can possibly lead to your budget spiraling out of control once again.

Here is a list of common Expenses:



Ok now you should have a detailed list showing you where your money is going each month. Total it and then deduct it from your Total income. You will be able to see instantly whether you are overspending, whether you spend exactly what you earn or whether there is anything left at the end of every pay period to possibly allow for savings etc.

This is where you need to be brutal, evaluate where you are spending your money and identify categories that are a “WANT” rather than a “NEED”, Everything that falls into the “WANT” category can be modified, unless you are way out of control with your spending, you don’t need to cut out the “WANT” items completely you could decide to cut down a little here and there, it won’t make a huge difference to your lifestyle however it WILL make a considerable difference to your budget. If you’re spending is out of control, then it might be necessary to cut out all or most of the “WANT” items for a short period until you get your budget back on track.

Right you have your new Budget, you’ve laid it out beautifully everything is rosy and even if it wasn’t, now you can see the light at the end of that very long tunnel. What’s next? You have to STICK to it; update it every time you spend anything even if it is only a bag of lollies or a packet of gum. It needs to be accounted for.

It is essential that you put something away each month for unexpected bills; for example if an appliance suddenly broke down or your car needs replacement tires. This expense is difficult to determine, tips on how to plan for this will follow shortly.