If you’re buying a coffee, you usually don’t think about the £2 that you’re spending. But if you think about it, a coffee a day can work out to about £500 during the course of the working year. The easiest way to keep a track of this is to note it down. Once you get your head around it, you'll find that budgeting can actually help you manage your finances, save for the future, avoid getting into debt and pay your bills.
I find the easiest way to get started is make a list of everything that's coming in and going out each month. It's going to be hard initially but you need to be honest with yourself and if you’ve spent it, make sure you note it down. Now, get yourself a calendar to help you budget. You can start off by making a list of everything that is coming into the house, for example your salary, tax credits, and child benefits.
I always find it handy to keep my bank statements close to hand, because they give me a clear indication of exactly where my money is being spent.
You now need to look at your regular outgoings; these are your mortgages or rent, utilities, travel and childcare. These outgoings won't change dramatically from month to month, but you do need to make sure they're paid to keep your head above water. You can then start looking at your variable outgoings; these are your groceries, clothes, and everyday expenses, for example newspapers, lunch or coffees. These outgoings will change on a month-to-month basis, and they are the ones that can have the biggest impact on reducing your spending over the year.
Every now and then you may come across an unexpected cost, for example a birthday or an anniversary. Because it's not a regular expense, don't think you don't need to write it down. You do.
I like to review my budget for the last month to see exactly how much I have spent. I like to split it into two, the ‘like-to-haves’ and the ‘must-haves’. The ‘like-to-haves’ are the ones I can focus on to see if I can reduce my spending for the coming year.
Now that I can see my regular incomings and outgoings, I can check if they are working well together. You may want to call your lender to rearrange some of your payment dates, so you can see earlier on once all the bills are paid, exactly how much you have left to spend.
You may also want to consider setting aside something for savings. I like to make a note of exactly what I want to save for and keep it next to my budget plan. It could be a deposit on a house, a new car or a holiday.
You may want to give your bank a call to see what services are available to you., for example mobile banking, Internet banking and text alerts. They're all great ways to keep in control of your spending.
You can also open a separate bank account. That way, you'll have two bank accounts, one for your daily spending and one for all your regular bills. Alternatively, you could look at taking out a weekly amount from your bank account to pay for everyday expenses like your teas, coffees, lunches and newspapers. It's a great way to curb your impulse spending, because once it's gone, it's gone, and you’ll know you shouldn’t take anything out until the following week.
You could set up an honest spending diary where you can note on a daily basis how much you're spending. It might also be a good idea to make a note in your calendar to review your budget on a monthly basis. I find this easier to do on a weekly basis where I have set myself a weekly budget and I review exactly how much I have spent.
If I've overspent, then I need to look at my ‘like-to- haves’ for the following week and see where I can reduce the costs. If I've under-spent, then it's more money for my savings pot.
You may not be taking advantage of all the benefits available to you. For example, if your children are under sixteen, there is a child tax credit scheme. You could also find that you’re paying more than you need to on household bills, so it’s worth calling retailers to see what offers are available for you.
The key to budgeting is being honest with yourself. There's no point in adjusting the figures to make them look better because the only person you're going to mislead is yourself.
You'll find that by budgeting, it'll soon become second nature and it will help you ease your day-to-day stresses. By having the whole family involved, including the children, you are setting them up for a stronger future.
I know it's hard, but keeping a budget is the foundation of managing your money. So remember, be honest, keep track of your expenses and make sure you stay on top of your plan, as things can change daily. Also, try to involve the whole family. Good luck.