Tips on how to budget
Month after month, you know how it is. Payday comes around, you check your bank account and smile at the healthy balance with plenty of funds for fun. But then your monthly bills rear their ugly heads and your hard-earned money starts to disappear.
Like it or not, budgeting is part of adult life. Stay in control of your finances and you’ll keep out of debt and have peace of mind. Here are a few tips on how to budget without the hassle.
Cut your cloth accordingly
It’s a famous saying that essentially means don’t spend more than you have. Don’t live a champagne lifestyle if your budget is lemonade, it’ll only end in trouble.. and possibly debt, it’s as simple as that.
If you only have £5 in your account and your friends ask you for a night out, it is okay to say no and that you can’t afford it, you don’t have to do everything. If you do go, don’t get into the habit of doing ’rounds’ of drinks, they always end up more expensive than if you’re getting your own drink… plus, you’ll loose track of your spending far quicker.
Keep cash and carry on
It’s really easy to forget the real value of money when it’s constantly on a plastic card rather than in your hands, especially since nowadays Apple Pay doesn’t even require you to event get your card out your (physical) wallet. If you’re getting carried away with spending, try taking out cash for a week and just spending that… you’ll find it easier to budget this way too if you’re trying to cut down.
Don’t waste food, have a ‘clear up’ day at the end of the week where you use up left over ingredient… and just what’s left in your fridge. It’ll mean you don’t waste money on food. If haven’t already sussed it, supermarkets tend to have huge reduced sections towards the end of the day, try shopping at 9pm on a weekday or 3-4pm on a weekday and stock up on the good stuff that’s about to go out of date… and then freeze it (if possible) or eat it.
Buy a train pass in bulk, or if you drive take your expected petrol allowance out in cash at the beginning of the month so that you don’t have to factor the payments in throughout the month.
Think about it
If you see something you want to buy, a piece of clothing, a new pair of shoes for example, do the ‘think about it’ test – if you’re still thinking about it in two weeks time then you can consider buying it, if you’re not then you obviously didn’t want it enough in the first place.
Build up your emergency pot
Redundancy, divorce or bereavement can not only be devastating but they can also seriously affect your finances – make sure you have a back-up pot. Research suggests you should save around 3-6 months worth of rent/mortgage, bills, travel and food and have in a spare pot somewhere – although we realise this isn’t that realistic if you just about get by as is… so start by putting away a bit extra each month as a contingency (even if only £20 a month) and keep building that pot, just to be on the safe side.
Gather all the information
Do you know how much you’re spending? It sounds obvious, but lots of people have no idea what’s going in and out of their bank account, until they’re overdrawn. Start by grabbing as much information about your spending as you can – bank statements, bills, receipts etc. If you need to start an excel spreadsheet to have it all in one place, then do so and keep it updated
What bills do you have to pay?
Sort out your priorities – what bills are non-negotiable? These include rent/mortgage, council tax, electricity, travel to work, food and so on. If you’re saving, perhaps for a holiday, wedding or a house, add an amount for that too. Tally up the cost and subtract it from your monthly salary to find out how much disposable income is left over
Prioritise your disposable income too. Look at what you spend regularly – a flat white on the way to work, a couple of brunches, yoga classes … it’s scary how costs mount up. Try to arrive at a total monthly figure. Can you afford it? If not, decide what really matters to you – Netflix or yoga? New shoes or a night out? Amazon Prime or that new top?
Make a simple planner
The important bit is to work out your budget and then stick to it. Money Advice Service and Money Saving Expert both have fantastic budget planners to help you do this
Could your money go further?
Once you have a budget, see where you can cut costs. There are masses of ways to do this; it takes time but is well worth the effort. For energy bills, there are plenty of great websites that compare providers and tariffs. You can save loads on food too, not just by cutting back on take-aways. For example, planning a week’s meals, making a shopping list and sticking to it saves over-spending in the supermarket. We could go on! Money Saving Expert’s 21 Top Tips to Save You Spending is a great start
To stay on top of finances, it’s a good idea to monitor frequently, if daily is too much then do it a few times a week… just so you know what’s going out so you can keep on top of it. Also if you check often you’ll know when to rein it in, and when you can have a blow out. Alternatively, download a budgeting app – here are a selection of our favs