Making a budget gives you a clear understanding of your finances. Some people get into all sorts of trouble with debt, simply because they spend more than they earn. Working out exactly how much money you have coming in and how much is going out each month, will give you control over your finances. Once you know the facts, you can see where you are wasting money or overspending without realising.

Understanding and having control over your finances will not only help you to steer clear of debt, but it will empower you and give you an extra boost of self-confidence.

If you are already in debt, taking a good honest look at your spending habits and working out a plan of action to change those habits, is a strong first step in getting out of debt.

If you have tried working out a budget before and found it unsuccessful, it may be because you were purely focusing on the monthly spend and forgetting to look at the big yearly picture also.

Often there are things we spend money on which happen at different times throughout the year and not in any set month, for example, holidays, dentist appointments, gifts for friends and family, house or car repairs etc… and whilst you cannot always know how much these extras may cost, you can at least allow a portion of your monthly spend to go into a saving pot, which can help to pay for those events throughout the year.

Life is full of surprises and if you need to pay for an unexpected repair, or move home in a hurry, having savings put by for an emergency can make all the difference between getting things sorted or getting into debt. I know that building up savings is way easier said than done, but using the strategy below is a good solid start.

It’s going to take a while, but it is worth your time. Grab a cuppa, grab a calculator and start on the first step to taking control of your finances.

Making a budget:

1) To start off on the right foot, it is really worth being as thorough as possible. Collect as much information about your finances as possible. Gather at least three months of recent bank statements, or even take a look over the past year’s spending to see where the unexpected spends occurred. If you have credit cards or store cards, collect the statements for those to see how much you are spending there. Collect your payslips and information of any money that is coming in. Gather all the details that you have of household bills, council tax, tv licence etc. Gather any receipts that you find lying around too, as these may help you to break down further how you are spending your money when shopping.

2) Often, just looking at where you are actually spending money will be a real eye-opener. You will probably be surprised at just how much money is being spent on impulse buys, a coffee in town, a quick supermarket trip where you went in to buy one thing but came out with a basket full, a night out, energy bills at different times of year etc.. These things all add up over time and starting to have a conscious awareness of where and how you spend your money will really help you to get into a money-saving, low-cost, thrifty lifestyle mindset.

Once you stop spending so much on things that you don’t need or use, you can start to put your money towards things which make your life more worthwhile.

It can be quite upsetting when you see, for the first time, where you are overspending. You may be tempted to ignore certain areas, like credit card spend or how much you spend on alcohol and luxuries. It is really important to be totally honest with yourself when creating your budget. If it helps, just keep it to yourself and remind yourself that no one will read it but you. It may help to create it on the computer and make a password-protected file. Do not be ashamed of where you are overspending, just be aware of it and make the decision that you will now be in control of how you spend and that in a year’s time your finances will be in a much better state.

3) To build a picture of monthly spend, make a list of all the regular, known outgoings that you have, such as rent/mortgage, council tax, contact lenses, any debt repayments etc. Work out the average monthly energy bill – do this by adding the last 12 months of energy bills together and dividing by 12 to get an average monthly bill – Do the same thing for your food shopping as well. Keep working out and adding the average monthly spend for things like gifts, christmas, clothes, holidays, car tax etc.

There are many templates for creating a budget online if you do not want to make your own – here is a good tool from the money-saving expert website: https://budgetbrain.moneysavingexpert.com/budgetplanner or simply Google ‘Budget Template’ to find something to suit your needs.

Now add up all the monthly outgoings and put it at the bottom of the list as your outgoings total. Finally take a look at all your income from employment, benefits, selling online etc, put that total on the budget aswell.

If your outgoings are more than your income… don’t worry, don’t feel ashamed, it’s completely normal and completely fixable. You’ve taken the first step, discovered that there is a problem and now you can take positive steps to fix that problem over time. Keep reading for a few ideas to get your outgoing spend right down.

If your outgoings are less than your income, well done indeed! Perhaps your next step would be to look at where you are overspending so that you may put more of your income into savings and into enjoying new life experiences.

4) Now that you have your budget list of exactly how much you are spending each month on average, it’s time to go through each item on the list and consider if you can make a saving.

Examples of where you might save:

• could you live somewhere cheaper or move in with someone to split bills?
• If you own your home, could you get a lodger to help boost income?
• If you buy contact lenses and pay monthly, could you make significant savings by purchasing them, in bulk, online, or wearing glasses for half the week and buying half as many contact lenses? If you pay £30 per month and reduce this to £15 per month, that’s a yearly saving of £180
• Could you set yourself a lower allowance for monthly food shopping, and stick to it? If you can cut down on your food shopping bill by £30 a month… that’s a yearly saving of £360 – You could cut down much further by bulk buying approved clearance food or by switching from brands to non-brands
• Could you cut out one of your morning coffees on the way to work and make a free one when you get to work instead? If you cut out one £2.30 coffee per week, that’s a yearly save of £119.60
• Could you switch energy providers and save money there?
• Are you on the cheapest phone tariff for your mobile?
• If you pay for a gym subscription but rarely go, could you cancel it and exercise by going for brisk walks and practising yoga or weight training in your living room instead? Cutting back on the average gym membership of £20 per month, could be a yearly saving of £240
• Can you cut back a little on spends such as cigarettes, beauty products, magazines, take aways, nights out, cinema trips, extravagant gifts etc.
• Can you reduce the cost of your fuel bill by switching appliances off and wearing a jumper? Check out the article Switch it off: Smarter use of energy for ways to save on household bills

Every little saving that you can make will add up significantly over time.

5) Keeping the achievable cut-backs in mind, draw up a new budget plan that you will do your best to stick to. Keep going back to it every week to make sure that you are sticking to it and to consider where there may be potential to cut back further, or to switch provider and save.

Once you have a budget to follow, and when you are honest about where you are spending your money, you have control over your finances and can start to steer them in the right direction.

If you have trouble sticking to a food shopping budget, it may be because you are paying for food, as and when, on your card, and not realising that you are overspending. At the beginning of the month, take out the allotted amount for the month’s food shopping in cash. Divide it between 4 envelopes, one for each week, and don’t spend more than you have in the envelopes!

6) If you have a low income and the money going out is way more than the money coming in, it’s time to start thinking about ways to change that. As well as saving on the amount that you spend, there are lots of positive steps that you can take to increase your income.

• You could consider what you have, that you no longer want or need, that you can sell online or at a car boot. Old mobiles, gadgets, dvds, clothes etc.
• You can visit your local citizens advice bureaux to get friendly help and guidance – they can also help you to write your budget if you are having trouble with it or if you need to pay off debts: https://www.citizensadvice.org.uk/debt-and-money/help-with-debt/budgeting/how-to-work-out-your-budget/
• Citizen’s Advice can also advise you as to whether you may be eligible for a tax reduction or benefits that help with the cost of living and childcare. They have a really useful webpage with lots of information about how to spend less here: https://www.citizensadvice.org.uk/debt-and-money/help-with-debt/budgeting/how-to-spend-less/
• You can visit your local job centre to see if they can help you to find a job that is suited to you, they can also help you to learn new skills and change your career path: https://www.gov.uk/contact-jobcentre-plus
• You can research online about ways to work from home or to boost your income, just Google ‘boost my income’ for lots of ideas to get you started

Long-term financial security and peace of mind is achievable if you can just get a handle on your budget. Each time you go to spend money, check-in with yourself – do I really need it? Can I find it cheaper elsewhere?

Making a budget and sticking to it, is well worth the effort. Over time, having conscious control over what you are spending will change your life for the better.

 
A few self-sufficient, thrifty or off-the-grid selections, including Solar Panel Chargers. Toys and tools that I’m saving up for!

 
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