How to stick to a budget and keep more money in your pocket
You don’t have to read the newspaper headlines to realise we are living in an age of austerity. While the economy isn’t technically in a recession, unemployment figures are still rising, spending on public services is decreasing and the cost of living feels like it is going through the roof. It doesn’t take a genius to realise that when piping-hot pasties are being taxed things obviously aren’ quite right…
For the average Brit it has never been more vital to live frugally. Of course, living within ones means and sticking to a budget always sounds like a sensible course of action, but inevitably isn’t as easy as it sounds. Here’s a few of the top tips for those who want to ensure they don’t spend more than they can afford.
Work out your income
You’d be surprised by how many people can’t actually recall the precise amount they earn as listed in their monthly pay cheque. It may be a ridiculously obvious starting place, but once you’ve figured out an exact figure for all your post-tax monthly incomings, including any extras, like bonuses, second job cash, tax credits, dividend interest and alike, you’ll be in a much stronger position to work out where your money goes. If you work freelance and earn a different sum each month it’s best to calculate a monthly average based on your annual income total.
Organise your paperwork
Once you’ve figured out how much money you have at your disposal, you need to list your core monthly outgoings. If you’ve not done it in a while, this could be quite fiddly, but it does become easier over time if you learn to stay on top of your bookkeeping.
Gather all your paperwork, including pay slips, utility bills, bank statements, credit card statements, insurance documents, council tax reminders and attempt to chronologically organise them using separate paper files or an accordion folder. Not only does this process afford you the chance to scrutinise the various payment you’re making, it also means the next time you go looking for a specific document you’ll know where it is.
List your outgoings
Using either a pen and paper, or (if you fancy getting a bit more technical) a spreadsheet on your computer, make three columns to detail who, when and how much you pay.
First list the compulsory payments - the bills that cover fundamental day-to-day basics, such as rent or mortgage, utility bills, insurance, debt or credit card repayments, childcare costs etc.
Next list down the next layer of essential payments – food (groceries, not meals out!), mobile phone and internet, petrol and car maintenance, tv licence, pension and savings payments.
Finally, attempt to estimate the amount of cash you spend on a monthly basis on ‘luxuries’. This is where you list all your spending on home entertainment (books, dvds, computer games etc), going out and restaurants, beauty products and grooming, special occasions, presents and holidays. It’ll never be an exact sum, but a rough approximation should be enough to help you when it comes to budgeting.
Do the maths
With all your monthly outgoings listed (compulsory, essential & luxury) it’s time to go through the dreaded process of adding it all up. This is the moment of truth. Are you spending more than your income or not? If you are it’s time to take decisive action. Try not to panic. The fact that you’re going through this process is a sign you’re ready to take action.
First you need to figure out which of the luxuries you can cut back on or cut out all together. While this might be the most painful decision, it should in a way be the easiest. Tightening the belt is character building stuff, so make sure you give yourself a pat on the back for being pro-active.
Cut and cancel
Let’s start with those little luxuries. Ask yourself if you can survive without them and then start to prioritise the ones you want to stick with. If you don’t think you can trust yourself to house your credit card in your wallet or purse, leave it at home when you’re off on nights out or spending a Saturday on the High Street.
Rather than buy brand new books, why not scour charity shops for cheap reads or make purchases using Amazon’s second-hand service. CDs and DVDs are usually much cheaper online these days and with cinema prices rising, they make for a good alternative to trips to the movies.
If you’ve not been to the gym, but have been paying for a membership for over a year, it’s time to take action. Find out what you have to do to cancel your subscription…and then do it! If you fancy getting back into the fitness groove, it’s worth haggling over a new deal by threatening to leave; the chances are you’ll be offered a much more enticing contract. For those keen on staying healthy, but not wanting to pay for the gym, perhaps your smart phone can help with a cheaper alternative or you could give up smoking?
If you insist on getting a clothes fix, do your best to wait for the sales and then be militant in the planning and execution of your shop. Repairing old garments can also lend a new lease of life to tired outfits. Replacing buttons and stitching small tears are cheap and efficient ways of getting more use out of clothing.
If you’re still planning on taking a summer holiday, or tend to go skiing in the winter, there are plenty of ways to save pounds here and there. Again, much comes down to being organised and knowing when to book the best deal, exchange money and tie up travel insurance loose ends.
Review, renew, start anew?
Your next task is to figure out where you can shave money off essential and compulsory items. Everything from your gas, water and electricity suppliers to your car and home insurance cover, mobile phone and internet contracts and credit and debit card accounts should be reviewed.
Make use of comparison websites, check Quidco for cashback on possible new deals, be sure to haggle with customer service representatives and take advantage of special offers. There’s a whole host of ways you can bust your bills and fix your finances.
Educating yourself in energy wastage in the home is sure to open a few new avenues for cost cutting. For example, with a hosepipe ban being enforced there has never been a better time to get savvy with the way you save water in the home. The less you use, the less you’ll pay in the long-term.
Turning electrical appliances off rather than leaving them on standby can save you a pretty packet, whilst washing clothes on cooler cycles is not only better for the environment, but also for the pocket.
Food bills are another obvious target for money saving. Spend a couple of weeks noting down the daily spend on coffee, sandwiches and lunchtime snacks and by the end you’ll no doubt be shuddering at the ridiculous amount you’ve spent. Make pack lunches, buy snacks in bulk at the beginning of the month and cut down on coffee shop trips by making your own hot drinks in the office.
When undertaking a supermarket shop, something which should be done with systematic vigour once or twice a month, exchange ‘designer’ brands for basic and own brand ranges. Better still, why not shop online reducing the temptation to whip down the aisles in a 'supermarket sweep' style panic. If you’ve got the means, you could even take to growing your own vegetables in the gardens.
Maintain a money diary
While you’re making changes to your usual spending habits, it’s initially advisable to keep a daily record of your outgoings. If nothing else it will at least allow you to recognise how the small changes can add up to big savings and give you some perspective when it might feel like you’re struggling to adapt.
Either make a note of your spending in a pocket notebook, or online using a service such as moneydashboard.com, and be sure to record all figures accurately. At the end of a month assess the amount and see where you’ve made savings and where you haven’t. Keep repeating the process and continually re-evaluate the way you spend.
As has been discussed, there are a plethora of ways to decrease your monthly expenditure, but at the end of the day it all comes down to willpower. Are you able to say no in the face of temptation? It shouldn’t be something you’re embarrassed about. As was made clear at the start of this post, times are tough and many people are in the same boat.
If you still find that your debts are mounting and you’re struggling to keep on top of repayments there are people and organisations with whom you can talk. The Citizens Advice Bureau has lots of useful advice as well as one-on-one help.