For many of us money can often feel like it’s in very short supply. With the costs increasing how can we live within our means but still enjoy a good standard of living
Budgeting can feel like a huge undertaking but having a realistic perspective on our income and outgoings is vital if we’re going to maintain control of our wallets.
One of the hardest battles to win can be in our heads – Ask yourself the question of the items you bought last month how many of them were because you needed them and how many were purchased because you wanted them. It’s a big difference. So what if others around us seem to have a more lavished lifestyle, maybe they’re in financial denial.
If we undertake regular basic budgeting reviews there is no reason why our lifestyles should suffer.
Why budget?
- To be in control of your finances
- To not waste money, but get to spend it on things you want to.
- Essential if you’re trying to recover from a debt problem.
What is budgeting?
- Having a clear idea of the money coming in and the money going out.
- A spending plan.
- A key to handling your money responsibly.
How to budget?
Very basically:
- Work out what money is going out and what do you spend it on, make sure to include an adjustment for savings and seasonal costs like birthdays, holidays and Christmas (work out your average yearly spend and divide by 12 to find how much you need to allow – scarily much more than you’d think)
- What money is coming into your household – wages, child benefit, tax credits, etc.
Now compare the two figures.
Does your spending exceed your income?
Yes, my spending exceeds my income
- Study your spending records and work out where savings can be made. Every little bit helps! Is your shortfall temporary or structural?
- Check if you are entitled to other benefits; i.e. family tax credit, working families tax allowance, housing benefit, etc. Direct Gov’s Beginners Guide to Benefits
- Cut down on smoking, drinking, take out coffee, take-away and going out! One less a week would save more than £1000 a year!!!
- Check you are using the cheapest energy, phone, broadband providers: www.uswitch.com , www.energyhelpline.com/switch
- Cut down on your energy use. Turn down the thermostat and wear a jumper; switch off the lights in rooms you’re not using; don’t leave appliances on stand-by; etc. www.energysavingtrust.org.uk/ , http://www.theaa.com/motoring_advice/fuels-and-environment/drive-smart.html
- Find the best deal for any credit card debts – take advantage of the 0% interest periods.
- If you are already in debt don’t tough it out and wait till it goes away, seek help! Make sure to include your repayment plan in your budget. Don’t borrow to cover a debt – a sure sign you need professional help. http://www.stepchange.org/
No, my spending does not exceed my income
What are you doing with the surplus?
- If you have a mortgage – make overpayments (check for any penalty charges) www.thisismoney.co.uk/overpay
- Use your yearly tax-free savings allowance – www.hmrc.gov.uk/leaflets/isa.htm
- Is there anything you want to be saving for?
- Have you made pension arrangements? www.direct.gov.uk/en/Pensionsandretirementplanning/index.htm
- Chat to an independent financial advisor to make the most of your money and plan effectively for the future.
- Check your spending for savings to be made – why spend more than you have to?
