Learn how to budget your money
Last Modified 16th of February 2021
Budgeting is a great way of taking control of your finances. Budgeting helps you to be fully in control of how much you spend and how much you save. It also makes it easier for you to get out of debt and helps relieve the pressure of your outgoings.
Getting started is the hard part
When starting your budget, the hard part is writing down all your monthly outgoings. When doing this try to include everything. To do this successfully start with all your regular payments such as rent and other bills. Then take into account the amount you need to survive for the month, set an amount aside you think you spend, and then add any dreaded debt that you may have.
Get your spend figure
When coming up with a spend figure it is good to come up with a monthly total as well as a yearly total. The best way to go about this is to work out a figure for the year, taking into account all birthdays, Christmas and any other holidays you have planned and divide this figure by 12.
On a month to month basis your payments will fluctuate so some people prefer to work it out yearly then divide to get a monthly figure. Others prefer to work it out monthly on the first day of the month; it just depends on what works best for you there isn’t any strict rules here.
Work out your income
Once you have a figure for your expenditure you are happy with, you have to work out your income. This can include your salary, and any other earnings you may have. Once you have both figures deduct your outgoings from your income and see how much you have left.
You have some money left? Save it!
At this stage you will know whether or not you have any money left over, if you do that’s fantastic. Instead of leaving your left over cash in a normal current account, why not place it in a savings account and watch as the interest builds.
A cash ISA is the best savings account available. You can save a large portion of money each year and any interest you earn is tax free. There are also other ISAs available such as the Lifetime ISA and the Help to Buy ISA – which is great for when you’re saving up to buy your own home!
You realise that month on month you’re losing money…
If after deducting your outgoings from your income you come to a negative figure, you need to act fast to ensure you don’t fall into high amounts of debt.
First of all look at ways you can save money, check if you are paying too much on your bills. To do this first check price comparison websites to see if you can find a better deal than you are already getting. Check any credit card debt that you may have, see if you are paying too much interest, if you are then you can check for alternative cards where you won’t be paying as much.
If your outgoings are too much due to your shopping bills then try and cut back on your shopping. When you go to the shops take a list with you of what you need and try and stick to the list, it’s best to avoid impulse purchases that just add to your outgoings.
It is important to set yourself some strict targets when trying to save money. Try and get yourself to a comfortable position as quick as possible. When we’re talking about saving money it’s important to remember that little changes can make a big impact.
There are a number of other ways to save some money, we’ve only named a few! Budgeting is all about being sensible with your cash and knowing how much you can afford to spend without having to worry about falling into debt.