Budgeting can be tricky, and it certainly feels like work but if money gets tight at the end of the month it is critical that you have a budget that enables you to smoothly balance your income and expenditure throughout the month.
Calculate your Income:As well as your salary, do not forget to include other sources of income that you may have such as overtime, bonuses, shift allowances etc. Be realistic on variable performance-based incomes so that you don’t set unrealistic levels of income for yourself which will not happen.
Always check that you are receiving everything you are entitled to from the government such as child benefit allowances or other social benefit payments. All welfare benefits are available here:https://www.citizensinformation.ie/en/social_welfare/social_welfare_payments/.
Be sure to include all forms of income such as any rent you may receive from a buy-to-let property or perhaps rental contributions from friends/ family members. Once you have calculated your gross income, deduct all taxes you pay on these forms of income, as this will give you your net income.
Set your expense budget:We advise people to firstly review what their ongoing expenses have been over the last six months. Then break this down into three categories; needs, wants and saves.
“As a guide try and separate your income into 50% Needs, 30% Wants and 20% Saves”
Needs:These are the essential items for day-to-day living. This includes mortgage repayments, utility bills such as electricity and phone bills, and of course, food.
Wants:These are items that people will typically spend to support their social lifestyle. These items include gym memberships, entertainment subscriptions, fashion items, holidays, and eating out. They are not essential, but the less money that is available for them makes life less exciting/enjoyable.
Saves:This is what remains and after your needs and wants and can typically be saved for a rainy-day fund or be part of your financial plan.
As a guide many people use a benchmark of 50% / 30% / 20% to allocate across these three areas and while you can use this as a guide you should adjust to what works for you and one that you can commit to. If for example, you have reviewed your expenditure and your needs account for 60% of your outgoings, then there is no point in allocating 50% to that bucket unless you can bring down these costs by switching providers.
It is important is that you understand what expense fall into which of the three buckets so if your ‘wants allocation’ is spent for the month, you commit to no further spending no matter how appealing a night out with friends may sound.
New technologies are available that can help with your budgeting plans. There are many apps available to download on your phone. Many are fee-based, but we like a good budget that has freemium pricing with a free model from which you can upgrade at a cost. Good budget is a great option, It's an American company, so ignore the $s and think €s.
