When living on a tight budget it can be difficult to make ends meet. Perhaps you need a realistic plan to pay off your debts, or you would like to start saving for short- or long-time goals.

Managing your money effectively will help your take action to find the right balance between spending and saving, direct your money to where it matters most, and reduce financial stress.

Setting up a budget

The purpose of setting up a budget is to identify the amount of income and the amount of expenses in a household in order to learn to live within your means.

One way to work out your budget is the budget spreadsheet created by the Schuldnerberatung Köln. It allows you to record all of the incoming and outgoing money.

1. Download the budget planner and save it on your computer as “budget-month-year”, for example “budget-September-2013.xls”. Thus you have the option to save your results and return to update them at any time.

You should keep in mind that a budget will change from month to month, so it will require monthly reviews!

2. Start entering all your regular monthly income and expenses.
Now you can start following the budget: In the “Balance”-field in the “RESULTS”-category you can see how much money you have left to spend on irregular expenses, such as fuel, foodstuff, clothes, hobby, …

3. Add your day-to-day spending on a regular basis, if necessary do it on a daily basis. Whenever you have added an amount, the balance-field will show how much money you have left.

 
Keeping a spending diary

If at the end of the month your expenses are higher than your income you should have a closer look at where the money is going. It might make sense to do a spending diary.

For at least one month, make a note of what you spend. Also include the small things, as they often end up costing more over time. Best would be to keep all the receipts and record everything straight away.
Once you have an overview of where your day-to-day spending is going to, you should identify the things you could do without, what you can cut back or even cut out.

Some very easy and comprehensible tips on how to save money

We have asked people what they do to make their money go a bit further. Perhaps some of their tips will be useful for you too.