Tip 1 — Budgeting
With inflation at record levels, household budgets are being squeezed more than ever before, and many are having to make difficult choices about where to spend their hard earned income and savings. For those who don’t already, budgeting can provide a solution to help you to categorise and then prioritise your spending, and aims to ensure that you live within your means i.e. you don’t spend any more than you receive during any given pay period.
Why Budget?
Ensuring that you’re not spending more than you receive is the first aim of any budget, as if you are, you’re likely to be building up debt to fund your lifestyle. Although this isn’t uncommon over shorter periods, continuing to do this over the longer term could create a much larger problem as debt accumulates which will eventually have to be repaid. If anyone reading this is in a situation where they feel like they can’t manage their debt, there are many excellent debt charities out there who can help — Community Money Advice and StepChange are both good places to start looking if this affects you.
However, even for those who may not be running a monthly deficit, budgeting is still an important tool for helping you and your household work out exactly where it is your money goes, to prioritise your spending, and to help you feel more in control of your finances.
So, if you want to have a go at completing your own budget, follow these useful hints and tips:
Hints and Tips
- Include EVERYTHING!
I know this might seem a bit unnecessary but including everything is essential to ensure that your budget is an accurate reflection of your lifestyle, as a few small expenses that are missed off can have a large impact over the longer term.
2. Work together
Even if you or your partner/spouse pay for different bills, it is essential you include your overall household expenditure in your budget to ensure it accurately reflects your lifestyle
3. Use a spreadsheet
This will enable you to add things up quickly as well as change costs as your lifestyle changes. A budget should be a document you consult and change regularly so it always accurately reflects what you’re spending. Money Saving Expert have an excellent spreadsheet that you can get for free (https://www.moneysavingexpert.com/banking/budget-planning).
4. Use an app to help track previous spending habits
Working out how much you spend on regular non-bill shopping such as food, petrol and clothes is difficult and most people can’t accurately work this out without doing a bit of research. You could do this by looking back at previous bank statements and using a calculator, but there are many excellent free apps that can connect to your bank account and will do this for you, such as Money Dashboard (https://www.moneydashboard.com).
5. Don’t forget your one-off annual expenses.
These are expenses that are one-off or occasional such as, holidays, birthdays, Christmas, car insurance (if you pay annually) and car servicing/MOT. These should be planned for in your budget and preferably the money to pay for these should be kept in a separate account. This will help to ensure you have enough to pay for these costs when the bill comes, without causing problems to your regular monthly budget. Also, by doing this, you could pay for your car insurance annually if you don’t already, which could save you money.
Hopefully, you’ve found the hints and tips useful, if you’d like to chat about how we might help, please get in touch on 0330 005 0028 or at info@thefuturefp.com.
Written by Financial Planner, Michael Duffield
