Making a budget can really help when it comes to staying in control of your money. Knowing where your cash goes each month allows you to identify unsustainable spending habits, and see where you can make savings.
If you’re eating into savings or building up debts, you’re probably spending more than you’re earning, which is obviously not something you can keep doing without completely running out of money and getting into real difficulty.
The main thing is to find out how much money you have available, and plan your lifestyle around it rather than trying to stretch your income to a lifestyle beyond your means.
Use a budgeting tool
Gone are the days when you’d have to scribble everything down by hand, sifting through piles of old receipts and bank statements, and keeping a notebook of what you’re spending. Of course, some people prefer this method, but there are lots of great budgeting tools available for free that make the job much easier. You can start with something like MoneySavingExpert’s BudgetBrain to get an initial idea of the state of your finances. You can even use a tool that links to your bank account so can get a really clear view of your spending, as with Money Dashboard.
Create a plan
If you’re overspending it’s essential to figure out where you’re going wrong so you can rebalance the books. One way to begin is by splitting your expenditure categories into two lists, one of essential spending like rent and food shopping, and one of extras like cinema tickets, gifts, and takeaways. Add together all your essentials and take the total away from your income – hopefully you should still have a positive number – then take away the total of your extras from what’s left, and see what you’re left with. If your extras take you into the minus figures, that’s where you need to find places to cut back.
Make every penny work
Budget for absolutely everything. It’s easier to keep your spending in check if you allocate funds for everything in advance, rather than leaving a miscellaneous amount for unspecified purchases. If you like to order pizza every other Friday, budget for it; if you have a habit of impulse-buying magazines, add it to your plan. If you don’t spend it during the month, the extra funds can go into savings or paying off debts. It’ll help you to get into the habit of knowing the limits of your income and what it should be spent on, rather than thinking that if you have money in your account it can be spent on anything.
Stick to your budget
This is probably the hardest part about making a budget for yourself, but there are a few tips you can use to help you stick to your plan. A good method is to take only take out the cash that you need, and avoid using your card. This will help you keep a close eye on what you’re spending, and reduce the risk of that easy impulse buy with a swipe of your card.
A good tip for families is to make sure you’re all in it together, and support each other in cutting back and sticking to the budget. Try to have fun with it too; when you go shopping make it a game for the kids to find the best products under a certain price.
And just remember that nobody’s perfect! Unexpected expenses will inevitably come up, so don’t be too hard on yourself if you go over budget every once in a while.