Drawing up a budget may seem like a chore at first but can really help keep control of your finances in the long run. It’s a technique that you could use to help strengthen your financial security and stop your spending getting out of control.
MyFamilyClub’s Gemma Johnson visits Kate and her family to see how their budgeting plan is coming along.
Avoid the head-in-sand approach
Being an ostrich and burying your head in the sand can encourage spending that you’re not totally in control of, so find all your bills and open them up!
Look at money coming in and going out
Gather together your bank and credit card statements, and savings details and take a closer look at the full breakdown of your income.
Then divide up your expenditure into a list of fixed outgoings (mortgage or rent, minimum credit card payments, children’s expenses, household food, utility bills, car expenses etc.), variable outgoings (entertainment, holidays, gifts, clothes etc.), and any other occasions to budget for (birthdays, Christmas etc.).
Use a budget planner
Note everything down into a spread sheet or using an online budget planning tool to give you a clearer picture of what you’re working with.
Keep a spending diary
Take a notebook with you and record absolutely everything that you spend on a day to day basis- showing your “Actual Spend” for each category of your budget. You’ll be amazed how much some things add up to – for example shop-bought lunches.
Reassess your outgoings
Look at where you can make cut backs on your outgoings. Take a closer look at those little luxuries that you could do without, and shop around for financial products like insurance that you could be getting cheaper elsewhere.
Make one lifestyle swap such as cycling to work once a week instead of driving, or preparing homemade lunches instead of shop-brought – small switches like this might make all the difference to your monthly budget.
Pay off debts
Always pay off debts before you start saving. The interest on debts is always higher than the interest on savings.
Set a target spend and save
Here’s the clever bit. Based on your historical spending and the amount of money you have to play with, you need to work out a ‘Target Spend’ for each category then work out how much you can save each month. It might only be £20 at first but set up an automatic transfer into a savings account, straight after each pay day to make sure you stick to it.