With an average income at hand, defining a budget for essential expenses and a significant haul over becomes overwhelming.
If you have never created a budget, the very term and the process might overwhelm you.
There is a gamut of ways to budget for enormous expenses. Stress upon these 3 things mainly while developing your budget:
- Track what you earn
- Track what you spend
- Ensure what you earn is more than what you spend
Do you find creating a budget troublesome? Look for these SIMPLE steps to create an effective budget for BIG expenses.
7 Easy steps for creating a budget for big expenses
Figure out how much money do you need and when?
Before sitting with a pen and paper and jotting down an endless list of expenses, it is imperative to frame a plan for expenses. For enormous expenses like purchasing a property, a timeline can be more flexible according to what you can reasonably afford.
Apart from this, other expenses, like children’s school fees, pending bills, subscriptions, or any immediate expenditures, have a defined timeline and need to be completed within that defined period. So, plan in this way, and streamline your expenses.
- Timely payments
- Savings for additional unforeseen expenses
- Sorted urgent and luxury expenses
Make space for savings regardless of income bracket
Whether you earn £20000 or £50000 per month, savings have to make a space there.
- Calculate the amount of savings you need by dividing it by the number of months you will need to earn it
- Re-examine your budget for ways to reduce this additional expense
- If a big expense is unavoidable or imperative, then treat it as a fixed expense
- Place it alongside other monthly expenses like children’s fees and monthly bills
Apart from this, you can use a budget calculator for hassle-free calculation and update your budget plan accordingly.
Identify whether you need a second source of income
- Are your expenses exceeding your income?
- Is any big expense standing around the corner?
- Is unplanned expenditure troubling you?
- Do you qualify for loans for people on benefits?
If yes, then proceed to the next step:
Once you identify the need for a second income source, here is what to do next:
- Calculate the amount you need to earn monthly from your second source of income
- Review your professional schedule and adjust another income source there
- Decide the time you will dedicate/ or you can dedicate to this side gig
- Explore sources for earning extra money
Sources for earning extra money from home:
- Affiliate marketing
- Completing surveys
- Customer care services
Dedicate a separate space for savings
As you save, make sure you keep your funds separate from your regular expenses. If you are habitual in using your savings account for meeting routine expenses, put this money out of sight. It will help you resist temptation.
Moreover, you can try building up funds. You can use a personal loan, use a credit card to meet the remaining amount, and pay later.
Track your spending
By having a balanced budget grant, you have the freedom to channelise your expenditure plan into action. Implementing a budget is more about identifying the spending limits and then making an expenditure plan.
The best way to track your savings and expenses is by using a spreadsheet or a budgeting tool.
For example, Jenny spends £10 every day on lunch. She and her husband, Albert, have a weekly budget of £50 for dining. Jenny realizes her lunch expenses are affecting her monthly savings. She packs lunch for herself rather than spending 10 every day on lunch and stopped carrying more cash than is actually needed. In this way, she saved £300 per month and ensured a healthy lifestyle. Moreover, she even looks out for loans for people on benefits and checks eligibility for ensuring a smooth flow of money.
Similarly, if you analyze your spending habits and cut unnecessary expenses, you can end up saving a promising sum at the end of the month. You can further use this sum to plan your big unavoidable expenses wisely.
Dedicate space for Emergency Expenses
Big expenses-SORTED. But that’s not it.
Apart from planning your future big expenses, dedicate a separate space for meeting emergency expenses, too. It is important more than ever.
The “Emergency Fund” will keep you from draining all your expenses. These are the expenses that nearly every individual is wary of. Financial management experts recommend maintaining a balance of 3-6 months’ savings for unforeseen or emergency expenses.
When may you need emergency funds?
- Job Loss
- Medical expenses that exceed income
- Need immediate repair services
Follow the 50/30/20 budget rule
The 50/30/20 rule is an easy-to-follow budget method that can help you manage your finances sustainably. The thumb of rule is to divide your salary into 3 categories:
- 50- for essentials (on the things that you must have or must do)
- 20- split between savings and debt
- 30- everything else you want to spend on
The rule of thumb is designed for individuals to manage their funds hassle-free and alongside save for retirement and emergency. Example:
- 50%- bills, car payments, groceries, subscriptions, or fees
- 20%- mutual funds, stocks
- 30%- dinners, movies, buying the latest electronic gadget, new handbag, etc.
While it is not mandatory, sticking to a budget will help you-
- Cover your expenses
- save for retirement,
- Do activities you relish tension-free
Savings is challenging, especially when life hurls a spear of unplanned expenses. These tips will help you define your expenditure goals and timelines and eventually help streamline your finances. Find out if you qualify for loans for unemployed on benefits. They might help you achieve your life goal without worrying about extra expenses.
Emily Rhodes operates as a Senior Content Writer at Easyadvanceloan for 5 years. She oversees the financial planning and monitoring of the cash flow. Emily also helps the firm forecast its financial standing by analysing the operational data and latest reports. It requires detailed research and predicting the trends before arriving at a conclusion. Emily Rhodes’s credible predictions and the best usage of problem-solving and analytical skills help the firm revise financial policies for growth. She ensures the best of her expertise by working in tandem with the CEO and Chief Operating Officer. Academically, Emily is a postgraduate with MBA in Finance from a reputed university.