1. Saving

New year, new plan: creating your 2018 budget

Creating a clear and workable budget that is designed around your needs is key to making sure that you have a comprehensive overview of your finances in the year ahead.

Follow these six steps to help you make your ideal New Year's budget.

1.    Set savings goals

Its recommended you begin building your budget with a solid savings goal in mind. Although a budget is a personalised tool intended to assist you in your daily financial life, it can also be utilised to help you build a solid savings habit.

Decide on one short term goal that you wish to achieve by the end of the year - such as a holiday or redecorating a room - and research how much you will need to save over 12 months in order to achieve it. By keeping the time frame relatively short you are more likely, psychologically, to fully invest in it.

2.    Choose a management tool

The key thing about a budget is that it is a tool which is constantly developing. As you use it more, you will make changes and additions to increase its efficiency and usefulness. Therefore it's important you choose a management tool that gives you fast and easy access to your budget at a moment's notice, be it at home or in the office: flexibility is key.

3.    Figure out your overheads

Your overheads refer to all your monthly expenses, including; mortgage or rent payments, transport costs, grocery bills, utility bills, and debt payments. This is where you will also account for the savings goals you set yourself earlier. Making them a fixed overhead will help you achieve them much more efficiently.

Each overhead should be assigned its category within your budget so that each individual figure is clear. If your bill payments vary from month to month then it's recommended that you look over your payments of the last 12 months and calculate the average amount. Always set this amount aside each month, regardless of whether the bill comes in at a smaller sum, as it will guarantee that you will always have enough left over to pay next month's bill if it is higher.

4.    Look at your past spending habits

Whilst some categories - such as mortgage or car payments - are more likely to be the same amount each month, others may be more flexible. For things like grocery bills it can be difficult to set a definite amount right away, as it may vary widely. To tackle this, look over your previous bank statements for the last 6 months - or your spending statistics - to see how much you spend in these categories on average.

5. Do the math

Once you have calculated all your overheads - including the small ones - then total them up so you knew exactly how much will be coming out of your account each month. Then, subtract this from your fixed income so you know how much money you have "left over" each month with which to socialise or put towards hobbies etc.

6.    Be realistic

If you usually spend over a 100€ a month on going out for dinner, but your budget only allows you 20€, then it is highly probable that you will have trouble sticking to it.

The more you break your budget the less likely you are to use it in the long term, and the more likely it is you will go overdrawn on your account and may even incur bank fees. To avoid this, be honest with yourself when you are making you budget and set yourself spending categories you feel you can realistically respect. Over time, these can be adjusted and refined as your spending becomes more disciplined.

Start the New Year Right!