SPEND RESPONSIBLY - Gaining financial control

Drawing up a budget

Once you have all the information on what you earn and what you spend, divide it into two categories – income and expenses. These will form the basis of your budget.

What you earn

This can include your regular, after-tax salary or wage, social security payments, child support payments and any income from investments like interest or dividends. If you receive commissions or bonuses, you can include these too but be careful not to overestimate these as it can blow your whole budget. Add the income from these various sources to find out your total annual income.

What you spend

The money you spend can be divided into certain categories, for example, those that relate to your home, your car, your health and so on. Divide your spending into these categories and add the total for each category. Then add up your total expenses.

The bottom line

The final step in drawing up your budget is to subtract your total expenses from your total income. The difference is a key figure, as it shows if you are spending more than you earn. If the figure is positive, it means you have spent less than your income. That’s good news, but aim to do something sensible with those savings, like paying off part of your credit card, or putting the money into a savings account.

If the bottom line is negative, you are spending more than you earn and you could be using debt to meet the difference. Unless you can increase your income, you will need to cut back your spending, or risk falling further into debt. Your budget should give you ideas about how you can trim your spending. Remember though, people tend not to overspend in areas like health care or transport. It is spending on ‘non-essentials’ – things we could easily do without, that often gets us into trouble.

Click on “ My Budget ” to complete your budget.

Don’t worry if you to have to use estimates the first time you prepare a budget. Your spending patterns will become clearer over time.

For more ideas on how to keep your monthly spending under control, click on ‘Make your budget work’ in this section.