Budgeting is one of those things that has taken me a long time to learn. It also seems that budgeting is one of those things that many people seem to ignore these days, it seemed to go out of fashion in the mid noughties. This approach to finances has resulted in misery for thousands of people in North America and the UK. Whether or not it is deliberate that people neglect their finances in this way, or it’s a lack of financial education, only they will know for themselves. For me anyway it was a combination of the two. Never really understanding how to budget and largely ignoring that fact.
As with all financial issues, it’s best to learn the lessons early in life. We have recently come across a tool aimed at families called Go Henry and a similar tool called Osper. They are prepaid debit and credit cards. You load money onto the app to allow your child to spend off the card. You can control what they spend their money on and your child can tick off jobs to earn their extra pocket money. For a full review check out this website, but it is safe to say so far so good. It’s working out for us and the children are enjoying using the app.
For those of us that are having to learn how to budget as adults, then the sooner you try and get to grips with your finances the better. The banking institutions where heavily blamed for the crash in 2008 because it seemed that the lenders didn’t perform any due diligence when lending to people. In fact they almost encourage irresponsible lending as this enabled them to make large sums of money. It doesn’t seem right that some of the richest organisations in the worlds largest economies profit from other peoples misery.
However, budgeting is straightforward and something that should be seen as essential not optional. It’s baffling that I didn’t put some of the following techniques into practice much earlier. A large number of men and women typically are unsure of the right way to budget, me included. Being able to keep a record of your spending, your incomings and also outgoings each and every month, quarter, or year, no matter what time period you need to budget for, is without a doubt one of the best life skills I have learnt in the last couple of years.
It does take discipline, and also keeping an eye on your incomings and your outgoings. Here are a few practical tips:
Write a list of all your incomings and outgoings. I know this is boring but it is the start of any good financial plan.
If you find that your outgoings exceed your income then you have a problem. You need to look at what unnecessary spending you can cut from your monthly outgoings. For me that included things like Sky TV, meals out on a weekly basis and regular nights out. These things are optional and it’s surprising how easy you can adjust or replace them with cheaper alternatives.
I realised that we watched mostly box sets and catchup TV. All of these are available by using on line services such as BBC iPlayer or Netflix. This simple step enabled us to save £90 a month as a family. That equates to over £1000 per year. Which if you add on the Tax and National Insurance equates to almost a £1500 pay rise.
The next tip I can give you is to write it down each time you eat out. Include takeaways, snacks and lunches. For use this equated to over £250 per month! Ouch. Rather than completely deny ourselves, we limited our eating out to a Saturday night takeaway once per month.
We also introduced a routine whereby on Fridays both my husband and I would buy lunch. The rest of the week we would use left overs from evening meals or prepare something the night before.
We also got into the habit of producing a weekly meal planner. This enabled us to go to the supermarket with a list of things we actually needed, but also we could make extra the night before for lunches the following day. This immediately took £30 a week off our shopping bill.
Armed with a list and a plan we then took the decision to use cash for all of our purchases other than petrol. Cash is almost out of fashion but it’s much easier to keep track of cash and stick to a budget. You also quickly see how much money you are going through. When you hand over a £20 it feels like you are spending £20, you never get that feeling with a credit or debit card.
Getting a grip of our finances was certainly one of the best steps that we took. It has enabled us to clear our debts and use the extra cash to start a new business venture!