Managing your budget

big budget

It’s a skill that most people need to have in all areas of life. Personally and professionally! Everyone has varying degrees of success when budgeting and some people find it a lot easier than others. Personally, I keep an online spreadsheet, but there are various apps and other methods for budgeting that work, and you just need to find what works well for you. 

Before we get started, if you’ve already glazed over, you’re not the only one. A lot of people are either afraid of or bored by the concept of organising their money. They don’t want to come across as tight, miserly, or money-obsessed. I regularly write articles on finance so clearly, I’m not too worried about the above but some of my family members wouldn’t be seen dead looking at their numbers and it’s interesting exactly how emotive, and how traumatic, money can be. 

It may seem like overkill, but if you find budgeting gives you anxiety, it may be worth seeing someone about it to get over that mental block and delve into why. As I’ve said before, being financially savvy does not mean being miserly, it can mean you can be more generous than before because you know exactly how much you can spend on friends and family (or yourself!) without the stress of wondering if you can or can’t afford it. 

Personally, I have a loose budget – I have a list of my direct debits and have things graded according to what can or can’t be flexible. My rent, for example, isn’t going to change, even if I make massive puppy dog eyes at my landlord and lady. My outgoings on food, however, or going out for meals, can definitely grow or shrink depending on what the month allows. 

The first thing to do for any method of budgeting is to list all your incomings. Here’s an example. 

Incomings:

Salary: £2,000

Freelance: £400

Other: £0

Total: £2,400

And your non-negotiable outgoings:

Rent: £500

Utilities: £50

Fuel: £40

Insurance: £20

Internet/TV: £50

Council Tax: £100

Savings: £60

Total: £820

Negotiable outgoings: 

Food: £200

Fun: £300

Make sure not to miss anything, and make sure to factor in entertainment, or you’ll end up overspending before you’ve even begun. The necessity of luxury is something not often discussed but should be. You can’t live in survival mode perpetually and not factoring in that odd coffee, or evening out will mean that inevitably, you have less money than you thought you did and may end up in the red faster than you realise. 

There are also unexpected costs that really need to be factored in, the toilet seat breaking, the car breaks down, you need a new kettle. Factor that in, add it to the list, even if it’s £10 a month set aside, that’s one less thing that’ll catch you out on a bad month. 

Once I have my numbers, I have them orange until they’re paid, and then I colour them green when they’ve gone out. This is my personal method, and I keep my receipts to track my spending. This isn’t a particularly rigid way of doing it, there are some other popular methods: 

Cash method – 

Rather than tracking your spending, removing uncertainty by withdrawing the cash for spending and allocating it into envelopes labelled “Bills” “Rent” “Food” “Fun” so that when the money runs out, you know it’s gone – there’s no more money to access. This can be a good method if you find you are regularly overspending.  

Different account methods – 

Keeping one account for direct debits and “paying yourself” into a separate account, so again, the money is kept separate and when the money is gone, it’s gone

All-in-one – 

This method is a little haphazard, but if you know your numbers and don’t get too confused, you just know your numbers and have your direct debits coming out of the same account as your spending. It can work, but not recommended if you’re prone to overspending. 

Now, what if you’ve done your numbers and they’re in the red from day one?! That can cause a lot of stress, it means that you’re likely piling on debt faster than you’re paying it off, and it’s worth looking at what is on your negotiable list, what can be limited and also looking into additional sources of income. Realising that you’re in the red monthly, is the first step to solving it and seeing where you’re going wrong. You may be able to negotiate a cheaper phone contract, lower-cost broadband, or even in some cases, lower your council tax depending on your financial position. You may be eligible for government help, or additional finances from other sources, but you won’t know unless you look into it. 

Good luck!

Useful Websites to help you create and manage your budget

https://www.moneyforlife.org.uk/

https://www.moneyadviceservice.org.uk/en/tools/budget-planner

https://www.citizensadvice.org.uk/debt-and-money/budgeting/budgeting/work-out-your-budget/

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