Effective money management in 2017 isn’t easy. Income levels have stagnated whilst the cost of living continues to rise.
Over the last 20 years the number of regular outgoings we have has increased significantly. Gone are the days where outgoings could be classified as either property costs or financial commitments.
We now have monthly mobile phone bills, music streaming subscriptions, gym memberships, furniture on finance, broadband subscriptions, Sky TV and the list goes on.
With all these things leaving our account at various times in the month, it can be tough to keep track of our spending. Often this can lead to accidental overspending which can quickly spiral. This is where budgeting comes into play
Having a monthly budget plan acts as a template for your spending. It will be able to tell you how much money you’ve got coming in and going out. From this you can then accurately determine how much money you can place into savings and how much you can afford to spend on leisure activities.
There are literally thousands of articles out there detailing how to set up a monthly budget. Instead today we’d like to focus on some simple guidelines that you can live by when creating your budget.
1. Be realistic
The first thing to realise is that budgeting will not make you into a millionaire. Budgeting will teach you to optimise your personal finances and get the most out of your earnings. If you want those designer shoes or want to eat out in fancy restaurants then you’re going to need a bigger income!
2. Be tough on yourself
A lot of the financial choices we make in life are based on impulse or an emotional response. Learning to say no, or finding budget-friendly alternatives will be paramount to budgeting success.
By the same principle, you need to take an impartial look at your current expenses. Are there any that you can go without? Do you really get the most out of your Sky TV subscription, do you really need to buy lunch every day? Can you go without that morning coffee? These small changes all add up.
3. Be honest
When budgeting, many of us will under-estimate on the amount we’re spending month-to-month, especially on leisure activities. If you’re unsure about how much to allocate to each outgoing, always budget high. It’ll be easier to reduce the amount down the line that it will to increase it.
4. Reassess regularly
Creating a budget is important, but what’s more important is remembering to reassess and adjust it regularly, especially in the initial stages. You may find that after a month of budgeting, your food bill is less that you thought or you spend more that you thought on transport. Identifying any discrepancies give you better control over your spending in the long-term.
5. Get your loved ones involved
Often, when we leave ourselves 100% accountable for our actions, we can be quickly forget about our goals and go off-plan. By letting your friends and family know that you’re budgeting and looking to improve your financial situation, you are somewhat shifting the accountability.
So rather than asking you out for drinks, your friends might ask you to come round for drinks. Instead of inviting you round, your parents may help you to save on fuel by coming to visit you. Again, these are small things, but when added up they can make a significant difference to your financial situation.
If you’ve never budgeted before, don’t hesitate to start now. Budgeting is no longer the arduous task that it used to be pre-internet and can now be done in a matter of 30 minutes.
Remember these 5 principles and we’re confident you’ll be well on your way to financial success.