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You need a budget!
It seems to be the start of so many plans, guides and books when it comes to getting rid of debt or living frugally. You need a budget. It makes sense to me, but I have one major hurdle. I’m self employed and don’t have a regular income.
As I shared in my welcome post here, my work is all freelance and my income varies dramatically from £500 some months to £2000 in others. This means that there are days when I’m going to be able to throw entire invoices at my debt and some where I’ll be scraping together the pennies just to make sure I have a tenner in my pocket.
How does a budget work?
From what I understand so far, the classic and most common way to use a budget is to begin by noting down your total household income for one month. You then note down all of the outgoings you expect to have. Mortgage or rent, bills, utilities, food shopping, travel expenses should all be included here. If you’re being very good you will note down every single possible spend down to the odd coffee you might pick up at the weekend.
The aim of writing everything down is to show you exactly where your money is going. This then allows you to adjust spending and of course reduce spending if necessary.
If you’re on a debt payment journey like I am you might adopt an even stricter approach. Dave Ramsey speaks about telling every single dollar (or pound) where to go. Your finishing balance should be £0 once you have completed your budget. This means that all outgoings are accounted for. The remainder of your money is then going straight into repayments on your debts.
It sounds so straight forward!
It really does sound straightforward. It’s a very simple and sensible method to begin to get your finances in order. I definitely know it in principle. It’s the application of it to my own form of income that I’m currently having difficulty with. My focus this week is to get all of my numbers into order and find a system that works for me. My income may be variable but my bills are always the same. That’s my starting point.
Take a deep breath. You need a budget, and it doesn’t have to be impossible to tackle.
For a fantastic, in-depth look at what to do next jump over to Managing Your Monthly Budget by Sue Foster