Developing a Realistic Budget

To begin the process of defining your economic needs, it is helpful to consider the kind of lifestyle that you want to maintain.

What do you spend money on? Typical expenses include housing, food, transport, entertainment, utilities and credit card repayments. Be generous with your estimated figures; if you're not sure how much something costs, ask your family and friends. If you're finding it difficult, start a daily log; you'll probably be surprised how much you spend on going out, your mobile or even food! Car repairs, household expenses and personal purchases (clothes, facials, etc.) can make up a large proportion of your expenses.

Look at these items. Are they important to you? Would you be willing to reduce the amount you spend on them? This sort of rationalisation allows you to discover what your basic economic needs are.

When comparing these needs to a salary, it is worth remembering the effect of income tax. A third to a half of your total salary will most likely be deducted from your pay, so your total salary will not reflect the actual amount you will have to spend on a day-to-day basis.