Budgeting – it’s a boring word most of us roll our eyes at. Associated with doing without, living within your means and putting away for a rainy day. But the reality is that with the ever-increasing cost of living and pressures on our daily finances, it’s an important part of sustaining healthy finances. Many of us find it difficult though – especially when we get hit with costs we’re not expecting. We’ve put together 5 tips that we hope you’ll find useful in your quest to becoming a better budgeter.
Buy a calculator
None of us like doing this, but it’s a good idea to sit down at the beginning of each month and forecast what expenditure you’re likely to have over the coming month. This should include everything – essentials and non-essentials. Once complete, you need to add it all up and compare it to your monthly income. If you fall within budget and have something left over, you need to consider whether you want to spend that on any luxury items or whether you prefer to save it. If the total is over what you can afford, you need to go back through the list. Starting with the items you can do without, cross them off until you are comfortably back within budget.
Start with the basics
Decide what you can and can’t live without. Start with the basics and everyday expenses, with particular focus on any direct debits or monthly payments you have to make. For most people these include rent or mortgage payments, work travelling costs, utility bills and food. Then you need to look at more out of the ordinary, but nonetheless important payments. These might include short-term loan repayments, or one off annual fees such as travel insurance or a car MOT. Finally, you can move on to the fun stuff and look at how much you can apportion to things like nights and meals out, cinema trips and if you’ve got a large amount left, maybe even a holiday!
What can I do without?
If you are finding being in the red a repeat occurrence and increasingly difficult to make ends meet, it might be time to consider longer term cutbacks. This could be achieved through downgrading your phone or monthly payment plan – perhaps you need to swap to a pay-as-you-go deal. Other considerations might be to postpone any monthly subscriptions. Perhaps you pay for subscription TV, or have a monthly film or magazine subscription. Consider the areas in your life where you can make some temporary cutbacks until you get back in the black.
Saving for the unexpected
With the rising cost of living, saving is becoming increasingly difficult for many of us, but where possible, try and put something aside every month. Not necessarily for a big expense such as a house deposit, or a new car, although this is great if you can! The emphasis here is more upon saving for those months when you get hit by expenses you hadn’t budgeted for. This could be a school trip, parking ticket, or in the event your car breaks down. It’s a lot easier to deal with these occurrences if you have anticipated them in advance and have the funds ready as the result of good financial planning.
Essentials vs Non-Essentials
This may sound obvious but sometimes the lines between what constitutes an essential item and a non-essential item can become blurred. Take clothes and shoes for example. We all need clothes to keep us warm and a pair of shoes on our feet, but like many things – too much of something can start to have a detrimental effect on our finances. So before heading to the till with your purchases – take a closer look at them and carefully consider whether you really need them. Is there something more urgent that you should really be spending your money on?