Welcome to An Edited Budget…
Money is a hard topic to talk about. Money is even harder to talk about when you’re not good at managing it. Have you ever spend many a night Googling ‘how to budget?’ If you dread looking at your balance about three days into the month or have ever tried to work out if a tenner can be stretched over four days until your next Pay Day- well, talking about money if even harder. Believe me when I say I know what you’re talking about. Because I have been in that situation for many years.
I don’t think there has been a time where I’ve not worried about money. Even to this day, I worry about money. And whilst I’m in a better situation with my finances than I’ve ever been before, I don’t think that worry will ever go away. Because I never want to be in that situation again.
If you’ve come to this post, I’m guessing you’re in the same situation and want some guidance on how to budget. The first step is looking for help, so congratulations. You’ve already made a huge step towards getting better. For the rest of your journey, here are some hints and tips to help you get on the right path…
HOW TO BUDGET THE SMART WAY.
The first thing you need to do is get a budget. It’s the only way to actively manage your finances and have a better relationship with money. Part of budgeting is knowing how much you have in the bank at any time. So start checking your balance every single day. Heart palpitations start just reading that sentence? It happened to me at the beginning too. Now, it’s the first thing I do when I wake up. In this day and age, you have no excuse not to be able to check your balance- most major UK banks have an app that will give you a quick overview of what’s in your account.
Next is to come up with a budget. There are many ways to come up with a budget, I found reading The Financial Diet helpful when thinking of mine up. However, I’m not totally 100% on board with the 50/30/20 budget split. I find being too restrictive with where my money goes makes me end up in a worse position than I was before. For me, the best way to budget is to work out my available balance at the beginning of the month. Then, I live within that number, no matter what.
HOW DO YOU WORK OUT YOUR AVAILABLE BALANCE?
Quite simply, I underestimate my income and overestimate my outgoings. My income fluctuates month to month, but I always have a rough number of what I know it won’t go below each month. My fixed outgoings (bills, rent, phone, subscriptions, credit card payments, initial savings, etc) never change and I know exactly which days they are going out on. With my budgeted outgoings (weekly food shop, petrol, any events that I have happening that month) I overestimate what I’m going to spend.
Once I have these figures, I subtract my outgoings from my income and there’s my ‘available balance’. This number will change throughout the month as your budgeted outgoing become fixed. But from day one, I have a fixed number in my head of what I have roughly to spend on me. And I never go outside of this number. Which means, if I want to blow the whole amount at the beginning of the month on shoes, then there will be no spontaneous squad cocktails. That’s just the way it is.
An Edited Budget.
This may not work for you, but I highly recommend trying a few different types of budgets until you find the perfect fit. It took me a long time to find this one and now that I have it, I’m stuck. If you fancy giving this method a go, then head to the bottom of this post where I’ve created a free download for you lovely lot to download and start saving.
Here are some more tips on how to budget and get saving those pennies…
PUT AWAY A REALISTIC AMOUNT INTO SAVINGS.
Savings are hugely important and yes the more you can put away the better. But stretching it too far will land you back to square one. And before you know it, you’ll be withdrawing that amount straight back out to spend. If you’re only earning a couple of hundred pounds a month, £50.00 is a good starting point. That’s just over £10.00 a week.
If you’re on a salary, a couple of hundred is a great start to your savings. Remember, whatever money you have left over at the end of the month, you can always move that into savings. Check out my previous post on how to motivate yourself while saving for extra inspiration.
OVERESTIMATE YOUR OUTGOINGS & UNDERESTIMATE YOUR INCOME.
This is the key to making sure you never live out of your means. It may mean you’re not spending as much as you want, but it’s a sure fire way to ensure that you don’t overspend. With overestimating your outgoings, it’s also a great way to challenge yourself to save where you can. I always give myself a mini fist-pump when my weekly food shop comes in over budget.
CHECK YOUR BALANCE EVERY DAY.
This was the hardest habit to get into, but every day I know exactly what’s in my account. Mobile phones and banking apps have made this such an easy habit to get into. And as I’ve mentioned, if you’ve never been that great with money, you are going to have heart palpitations at the beginning. But these will get better. I promise. Soon, it will become second nature.
DON’T BEAT YOURSELF UP ABOUT DEBT.
Believe me, I’ve wasted many a day in my past worrying about debt. If you have debt, it’s okay. It’s not about the physical debt, but how you manage it. If you’re ignoring it, then you’re never going to get better with money. If you accept that you made a mistake and take active actions towards improving your situation, this is good. It means you’re actively working towards getting yourself out of it and taking back control.
Be realistic with how much you can pay back. It’s good to put as much as your money towards paying off debts. But if you don’t give yourself enough wiggle room throughout the month, you’re going to be back to square one. It’s better to work slowly but surely towards getting rid of debt, than too quickly and having to borrow again when you get out of depth again.
SACRIFICE BUT DON’T BECOME A BUDDIST MONK.
I got this advice from a mortgage advisor when speaking about saving up for a home. Her advice was it’s good to cut back on spending to save, but don’t go overboard. Because at the end of the day when you finally achieve that goal, you’re not going to enjoy it. If you’ve spent two years not going out saving up for a home, you’re going to resent the house once you get it. All the words of a mortgage advisor and these are words that I’ve taken to heart. So whilst my treats are not elaborate, Lee and I always make a note to spend pennies on something special, like a bottle of wine and popcorn on movie night.
What are your tips on how to budget?
I hope these tips help you on your journey to getting better with money. Don’t forget, if you fancy checking out the budget spreadsheet that I use to manage my finances, sign up for my newsletter and the download will be sent to your inbox in no time.
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