Thinking about your finances and preparing a budget can at times feel pretty overwhelming. However, it is important that you manage your finances well, as not doing so can land you in a spot of trouble.
We’ve compiled a few ways to help you to manage your budget and a few dos and don’ts for the budgeting world. They might not all work for you, but it could be worth giving one or two a go!
There’s no way to glam this up: a budget sheet is literally a list of everything you earn, and everything you spend – including your priority bills and essential expenditure.
Priority bills include things like:
rent/mortgage council tax utilities etc
whilst essential expenditure can include items such as:
food and travel expenses
It doesn’t include clothes (unless required for work), social outings/events, presents and things that aren’t necessary in order for you to live. It sounds harsh, but this is the best way to strip down your finances and work out what you can realistically afford.
You need to be honest with yourself in order for this to work.
These expenditures never seem like much at the time, but over the period of a month, and definitely over the year, it adds up to quite a significant amount. You don’t have to alter your lifestyle, but you should list your expenditures accurately, so you can see how much you actually spend as it always tends to be more than the amount that you think it is. If your expenditure outweighs your income, some budget cuts will need to be made, but if your income outweighs your expenditure you might want to consider what you’re doing with that extra cash each month.
For tips on how to save, check out our blog post on easy saving tips [link: http://www.clearandfair.co.uk/easy-saving-tips.html].
Like budget sheets, finance planners allow you to keep track of how much you are spending, but unlike budget sheets, you can also keep track of when you are spending it. The best way to form these is with a calendar – either online or a hardcopy, whichever you find easiest to use.
The first thing to fill in is your pay date, and remember to check when you actually receive your pay each month as some companies won’t transfer money on the weekend or bank holidays.
The next thing to fill in is all of your contractual payments, that is, payments that you are contractually obliged to make and may have adverse or legal consequences if missed, and then your priority bills.
It might be a good idea to also add in birthdays and occasions, so that you know if an extra payment is coming up, and then you can write down when you do your food shop each week.
If you buy something that isn’t planned, put it on your planner, perhaps using a different coloured pen, so if you’re short at the end of the month you can work out what you need to limit yourself on next month.
Finance planners require a lot of effort if you want to keep tabs on all your expenditures, but if you need to be aware of your budget it’s certainly a clear system to try.
This is a simple tool and once set up, it should require little maintenance. All you need to do is set up a direct debit from your current account to your savings account to come out on the day you receive your wages every month. This will automatically set your budget for the month and you won’t be tempted to spend the money you would typically transfer just before your next payday.
Be careful not to underestimate how much you will need for the month, as you don’t want to find yourself in a tricky position with priority bills. A direct debit should be set up after working through a budget sheet or finance planner. Once you’ve worked out how much you can realistically afford to save each month, make sure that money goes straight into your savings account.
With direct debits, you need to be aware of possible future payments as well: if you know you have a car MOT due, maybe your annual train ticket is up for renewal, or even if there’s an important birthday coming up, you may need to adjust the amount you transfer into your savings account that month.
Sometimes budgeting is difficult because you have no real reason to limit your expenses. Whether you’re looking at the next few months or the next few years, if you have nothing to save towards then you’ll probably save very little. It’s a good idea to have short-term and long-term saving goals, whether it’s a holiday, a deposit for a house, or even a safety net for when things go wrong.
At clearandfair.co.uk we know how important it can be to budget and keep your finances in order. However, we also understand that life doesn’t always go as planned. This is why we compare payday loans from different direct lenders, so if you do have to take out a loan, you can do so knowing you’ve got it for the best price.