I was always taught to save up for things I wanted, but that didn’t always happen. My dreaded twenties saw to that!
Money was definitely something I used to just wing. I was never really, really bad at it, but I definitely wasn’t good at it. So, now I’ll be paying back a loan until I’m 40 – crap, but it could be much worse.
Over the past couple of years though, I have been good with money. Great actually.
I shared lots of ways to start being better with money in my last blog, but the best way by far is logging everything you spend.
It literally is a case of every penny counts, and I can tell you where every penny of mine is, or went.
There’s so many different ways of budgeting and so many different apps or sites to help. It doesn’t really matter what you prefer to use, a pen and paper will do. The key to it all, is logging absolutely everything the comes in and goes out… I mean everything!
I use a website called Everydollar, but this is only my personal preference (this is not a paid promotion).
I break my budget down in to categories; Incomes, Fixed Spending, Flexible Spending and Savings.
It’s the Flexible Spending category that was the saviour for me. It gave me freedom within a strict financial structure and I’ll explain how later, so try and stick with me!
For now, here is a brief overview of each category and how you could do it too:
Basically just write down what you have coming in for the month. For a lot of us this won’t really change. If yours does, I guess you will have to work out an estimate or average and take it from there.
These hardly ever change. Put together a list of all your monthly outgoings that are pretty much the same each month. If you can’t remember them all, have a look through your bank statements and check your direct debits.
The usual suspects for this list are:
- Council Tax
- Home Insurance
- TV packages/subscriptions
- Car Payment
- Car Insurance
- Mobile Phone – a good tip here is don’t go over your contractual minutes/data allowance. If your bill is a different amount each month this could be why. Contact your phone company and ask them to review this, you will save money by being on the correct tariff for your usage.
Other things that fall into this category that only the luckiest or most sensible of us won’t have, would be:
- Loan payments
- Credit card payments
And so on. I personally have quite a few more than this because I have things like pet insurance and a prescription subscription for medication. Everyone’s will be different, just make sure you capture them all.
Next up, is things that you spend on each month but the amounts can change, sometimes drastically.
The usual suspects for this list are:
- Food shopping/Eating out
- Personal spending – this can be extremely variable for some people. Try and give yourself a budget and stick to it. A good way of getting used to this is to break it down into a weekly amount. This helps stop us living like a Queen for a week and spending the rest of the month flat broke and fed up… If you can relate?!
Last, is savings. Not everyone can afford to save on a regular basis but I think wherever possible we should at least try and have a little bit put away in case of emergencies. I get that this can be difficult but just try your hardest and make this bit a priority at first.
For others, saving is the norm (who are these sensible people?!), for those, here are the usual suspects for this list:
- Rainy Day
- New Car
Simple so far?
Now take every single penny of income and choose how you will share it into each of the above categories.
Incomes, Fixed Spending & Savings should stay the same and be easy to stick to for the whole month.
The fun starts with the Flexible Spending category…
I think this is the most difficult but useful part of budgeting. Once you get used to doing it, you get the freedom but also the feeling of being in control. That’s something that I never felt I had before.
So you will have set a budget amount for all things in this category, such as Petrol, Food Shopping, Entertainment.
But the great thing about this category is, each section is interchangeable. So if you spend £50 more on entertainment than planned, you’ll have to spend £50 less on Food Shopping or Petrol that month. As long as you don’t go over the original amount planned for the whole category, it’s what it says on the tin – Flexible.
Just remember to keep a note of every thing you spend, and place it in to whatever category it belongs in, deducting it from the original planned budget.
If you do have a slip up and go over budget, you would have to account for it the following month or take it from savings. This is not something I’d do, and I think it could be a slippery slope so I definitely try to avoid it.
It took me a while to get into the swing of it, give yourself at least three months to find your groove. Play about with things and make adjustments until you find what works.
I won’t lie, sometimes I leave it too many days before I update my budget tracker and it’s hard to remember what I’ve spent on what… The best way in complete honesty is to just keep track every day.
After a while of doing this I’ve been able to get in control and stop letting my money just dwindle away.
It’s given me the oppotrunity to pay off some credit cards, and save up for holidays.
The absolute best part of it all is that I finally feel like I am in control of my money, it’s not in control of me and that’s a win.
Rid chaos, Reap control.
No one ever truly feels like they have everything under control... do they?