Finally living alone? How to create a successful monthly budget

Living on your own brings with it a renewed sense of independence, and the ability to walk around in your pyjamas all day on Sunday without being judged. Living alone also means that you will have to budget and save your money for those unexpected expenses.

You will also need to look at making financial decisions such as taking out a medical aid and car insurance. Below is some handy advice on how to create a successful monthly budget while living alone.

Calculate your expenses

Before you start setting out your budget, you will need to calculate your monthly expenses. This process involves consulting your bank statements, receipts and financial files to ascertain what your monthly expenses are.

Because some expenses are intermittent, such as your car insurance or an affordable medical aid, you will find that the best results come from calculating an average of six months to a year. Add up everything you have spent over the last twelve months then divide by the number of months to  give you your average monthly spend. You will also need to factor in unexpected bills.

Set goals

There are two types of budgets: a long-term budget and a short-term budget. This also means that there are two types of financial goals: immediate and long range. Immediate financial goals focus on your spending ‘today’ or in the moment, while long-range financial goals focus on saving and spending over decades.

You will need to determine which of your goals affect the necessities and which affect the luxuries. Immediate financial goals cover current expenses, such as rent payment, car loans, utility bills, child care, food, cell phone and household supplies. Long-range include retirement savings, investments and even charitable donations. Once you have these goals set, you will better be able to create a budget.

Determine your income

Once you have calculated your expenses and set some financial goals, it is time to calculate your monthly income. Aside from your regular salary, you will need to factor in other elements that contribute to your income such as cash gifts, selling items online or even child support.

Your income will need to be calculated as ‘after taxes’ as this is the spendable amount you are given by your company. Once you have added up all of your income sources, you will have the final amount that is your monthly income. This final amount will help you to better consider how to start your budget and will also allow you to calculate expenses.

Set up your budget

The steps mentioned earlier all lead you to this moment: setting up your budget. The clear goals and guidelines that you drew up earlier will help you with this. As you set up your budget, be sure that it includes enough money for you to achieve your goals, both short and long-term.

Write down your expenses and try to make them equal your income. You will soon find areas you need to cut back on or unnecessary expenses that are draining your wallet. Your budget will also need to include ‘disposable’ income, such as cell phone contracts or clothing store accounts. Be sure to also allow yourself a little fun with your money, such as a night out at the movies or dinner with friends – life can’t be serious all the time!

Tracking your budget

Once you have set up your budget, you now have to try and follow it. This can be difficult, especially with unseen situations arising but it can be done if you track your budget. It can be time-consuming to note down all of your expenditure in one day and subtract them from your account and budget category, but it will help to see where your money is going.

To track your budget, you can use computer software, the old-fashioned pen and paper method or the envelope system to help you track your budget. Take time to review your budget on the first day of every month to help you track what you spent the previous month, and put these expenditures into the right categories. Be sure to collect receipts and keep them so you can have an accurate picture of what you have spent.

Don’t break the bank

Creating a budget while living alone sounds daunting, but it is a simple process and one that every young professional needs to undertake when they finally leave home for their own place. A medical aid, car repayments and other expenses should all factor into your budget planning, as should any extra sources of income. The process will also help you realise where you can cut back on spending (do you really need that extra pair of shoes this month?) and where you can save money. Following the steps above will help you to successfully set up and monitor your monthly budget while living alone for the first time.