Categorise your expenses

• Look through your bank statements for the past month and your receipts, to get an idea of what you spend money on.
• The monthly personal accounting spreadsheet has more categories to give you an example you can tailor it to your needs
• Keeping a record of where your money is going. Any large purchases or frequent purchases should be noted. Things you buy on a daily basis can quickly add up, for example if you spend just 5 dollars a day on coffee over the year that comes to over $1800.
• Aim to have as few unknown expenditures as possible
• Where possible and not too costly move yearly payments to being monthly, this will make budgeting on a monthly basis more easy and you can better see how much money you have left at the end of the year
• Consolidate providers for successful budgeting, where you have the option go with the same provide for example for gas and electricity, this will mean less bills to pay and will generally be cheaper
• Once you have a months worth of spending information you are ready to construct your budget from this.

Money saving tips with budgeting

• Each category is either an essential expenditure or non essential. Generally paying for heating would be considered essential while paying for going out would not.

Essential expenditure

• With respect to budgeting this boils down to shopping around for the best deal, when your auto insurance is up for renewal look for other providers
• If you have any outstanding loans then look to paying them of, ensuring that you pay of the loans with the highest interest rate first, it may even make sense to consolidate your loans into one loan as long as the new loan has a lower rate and the terms on the loan are not overly restrictive.
• Are there things in this list was are not actually essential? For example do your still need your land line? If you already have a cell phone you could do without the land line, this will help with your budgeting as you will have less bills to worry about.

Non essential expenditure

• In budgeting terms to cut down on non essential expenditure it is helpful to introduce a concept called marginal utility. This is the utility(usefulness or entertainment) gained from an increase in the amount available on that good or service. For example take two different leisure activities reading a book and going on a night out. Lets assume that reading a book for one hour gives the same entertainment as going out for one hour. Now we can work out which gives the best bang for your buck.
  Book (cost $10) time spent reading 10 hours.
  Going out (cost $50) time spent 5 hours.
  Book costs $1 per hour while going out is $10 per hour. So it is clear from this example (as long as both are equally enjoyable) it makes more sense to invest in the book than going out. Even in the case where going out is twice as entertaining as reading a book it still makes most sense to get the book.