The main issue with having a budget is that they fail to work the way that you want them to; it is all well and good opening a savings account but do you use it correctly? Many people don’t use their savings accounts in a way that can benefit them and that is not helpful to you or your bank.
Next, people working on a budget will work out what they have coming in and try to reduce their expenditure without a solid framework to work with. If you have not got a solid framework to build your budget around, then you are not going to succeed on a budget.
Before you start working out a budget; work out to the last penny your earnings; then the next step is just a basic assessment. If you find that you are using your savings or creating debts, left, right and center then you are spending too much money.
Before you begin your budget framework, you need to have to have some idea of the scale of the problem and the size of the problem. If you do not know the answer to this then you cannot set about fixing it.
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This is a very true analogy; major over spending will encourage you into a downward spiral which can cause you to get into real trouble, you will have a struggle to climb back to the top of the spiral.
Once you know where you stand with regards to income and expenditure, you can begin to alter and prioritize your money and stand by your means. Many people know how much money they have coming into the house, but not how much is going out. You must get a grasp on both and discipline yourself; else you cannot balance your finances.
What he suggests is that you set aside different bank accounts for different areas of payment. What you do is add to these different areas each week when you get paid; this way what is left in your main account is what you can afford to spend on luxuries.
Then when it comes to a holiday and you have only £300 in your annual holiday account, do not go for a holiday which is worth £370. Do not spend what you do not have. This way will keep you in budget and help you to remain happy.