Would you like to have money for travel but assume you can’t find the money required to pay for your desired trip? Most of us have to budget for our annual holidays, and if travel is important to you then the first step in putting money aside for your next trip is to start a financial budget.
Know Your Own Financial Position To Spend Money Wisely
Reflect on your eating habits. You assure yourself that you have had hardly anything to eat on a particular day, hence are confused when you don’t lose weight. This myth is blown right out of the water when you keep a food diary and write down everything you have eaten. The same applies to money.
Growing up, my mum taught me the importance of budgeting and not spending more than I was earning, so I have always been financially aware and have our financial planning down to a fine art. I remember her drawing out her weekly “housekeeping” money and putting set amounts into different slots within a tin. She had a written shopping list which she would tick off as we placed items into our shopping trolley and when the money was gone, she had to wait for the next week’s allowance. My father was an accountant and whilst always aware of their finances, it was my mum who took control of the finances on a weekly and monthly basis.
I am a huge fan of budgeting when it comes to money. No matter what your circumstances, most people’s financial situation can be improved by having a budget, thus freeing up money to save for holidays.
What Will A Budget Plan Show Me?
If completed fully and honestly, your budget will show you two important facts :
- Whether you spend more than you earn.
- What you can afford to spend, which will enable you to prioritize where and what your money is spent on.
Where To Start?
Ideally, set aside 2-3 months to track all your spending, whether by cash or credit card. Keep receipts or jot down the amounts spent for each month, however trivial it may seem.
Begin by gathering together your bank statements and credit card statements and pay slips for these past 1-3 months. These statements should provide accurate figures for all direct debits and standing orders.
I am a great believer of writing everything down on paper, as I believe it makes whatever is written real and makes you more accountable. It is also easier to digest the information, and see the wood for the trees, especially when it comes to money.
If a budget is too narrow, vital spending will be missed and those small expenses will not be accounted for. Therefore for true accuracy it is important to also account for one off expenses such as Christmas and replacing new vehicles etc.
The following exercise will help you get a handle on what you are spending on a monthly basis.
Extra Tips Before Completing Your Budget Planner
- If you have joint finances, any budget must involve all parties, especially when deciding to put money aside to save or cutting back on expenses. Make sure everyone is on board, by completing the planner together.
- Be sure not to account for some expenses twice, as some expenses overlap.
- If you are unsure of the exact figure in any category, be conservative and overestimate rather than underestimate.
Completing Your Budget Planner
First, take a sheet of paper, headed Earnings and list your income from every source. This should include income from savings/investments, rental property, pensions, benefits, together with your employment income.
TIP : Use the net figure if employed and the gross figure if self-employed. Account for your tax bill under one of your chosen Expense Categories in step 2.
Add up all items and make a note of your Monthly Income Total. (Figure 1)
Second take a sheet of paper and write down ALL the items that you spend money on.
Be thorough and remember to include EVERYTHING however much it costs. (e.g snack bar from garage when buying fuel)
It is important that you don’t just write an item for “Car”, but include car insurance, road tax, fuel, parking fees, car maintenance, breakdown recovery and train/bus/taxi costs too.
You will not get an accurate figure of your spending unless you are this thorough, despite how tedious the exercise may seem.
Once you have listed all your expenses it is now time to insert them into Categories for ease of calculation purposes. So for example, you might have a category for Insurance or Transportation or Savings/Investments.
It is entirely up to you how you categorize your expenses as long as you list everything. Don’t forget to also include larger “One Off” items such as Christmas, Birthdays, replacing Appliances etc.
Take a pad of lined paper and head each sheet as follows :
- Column 1 – Category name
- Column 2 – Total Spent whether weekly,monthly or annually
- Column 3 – Monthly Total (Convert the figure from column 2)
Now add up the monthly total from your categories to give you a Monthly Expenses Total. (Figure 2)
Figure 1 less Figure 2 = Total For The Month
Hopefully, this will show that you earn more than you spend and can start putting aside money towards that holiday you would love to take.
The bottom line is that for most people, it all comes down to choice. If you want to save for a holiday, it has to be a priority and one that you are willing to save towards.
Make changes when/if needed when creating a budget.
I recommend going over your budget on a regular basis. This may mean once a week, once a month, or something else. Do what feels right for you and what you think your situation calls for.
Planning any trip requires money and often means cutting our expenses which can be hard work.
If that wasn’t enough, circumstances change and our income may fall or our fixed expenses rise. Therefore we have to be realistic and adaptable when it comes to keeping a Budget.
By keeping a thorough budget any discretionary spending is highlighted and initially these costs can seem scary. It is these costs which add up over the course of the month, many which we are totally unaware of, such as a magazine here, a snack there, but all of which drain money from savings that could go towards our wished for holiday.
Be sure to check your budget monthly or quarterly and make any necessary changes, but above all, keep going!
Do you stick to a monthly budget? If not, is it something you would consider trying?
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