Finding Budget Bliss

Wednesday, January 9th, 2019
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December is fun. There’s no doubt about that. But all that fun can be a bit of a drain on your finances. Luckily, December is followed by January, which everyone knows is the best time to take stock, start fresh and build some killer new habits. Like setting a budget.

It’s not as cool as some of the trophy resolutions (like starting every day like a yogi – with a sun salutation and a green juice), but having a clear and realistic budget is a great way to gain more control in your life. It can mean no more scraping coins together the day before payday or maybe allow you to have some extra pounds tucked away to spend on something worthwhile, like a new phone or trip somewhere warm.

To help you get started on living your best (budget) life, we’ve put together our tips and tricks for getting started and making the habit stick.

Tip 1: Work out your income and outgoings

Understanding what money you have coming in is key to knowing how much you can spend. You simply look at what you’ve got and allocate your spending from there.

If you work part-time and your earnings are inconsistent week-to-week, you may need to come at it from a different angle. Start by working out how much you need to cover regular payments and standing orders. These are things like your Spotify subscription, Netflix, rent, and phone bills. Once you’ve calculated that, you can put together a second budget for those “nice to haves” – like dinners with your friends or a coffee on the way to work. In other words, the things you love but don’t necessarily need to get by. Having these two budgets in place will give you an idea of how much you need to work in order to live.

Bonus tip: Factoring in those “nice to haves” gives you the chance to do you! Without those little pleasures, you’re much more likely to break the habit with a spending spree! Make sure your new budget is sustainable by trying not to sacrifice your lifestyle too much. On the other hand, if you know you can cut back in certain areas, why not give that go and see how much you can save! Which brings us to…

Tip 2: Review your statements

If you’re really committed to making some financial fixes, it can be helpful to print off the past 3-6 months worth of bank statements. Once you’ve got them in your hot little hand, go through them line by line (we know, it’s a big job) and assign every purchase a category (eg. ‘Food’, ‘Entertainment’, ‘Clothes/shopping’ etc.). Tally up each category to work out where you’re spending most of your money and think about where you can cut down. For example, if you have lots of £3 – £5 trips to Sainsburys at around 1:00 pm, it’s probably a sign you can save about £15 – £20 a week by taking a few minutes to pack a lunch each day.

Bonus tip: You’ll find it’s much easier to sort your categories and expenses with the help of a spreadsheet.

Tip 3: Think about savings

Hoping to put a little bit of moolah away each week? Once you’ve worked out your incomings and outgoings, and maybe even found some areas where you can reduce your spending, start thinking about how much you can afford to put aside each pay check. It’s helpful to be realistic here (see the above point about leaving room for life!). If you’re putting a ton of money away but living like a churchmouse, you’ll be tempted to withdraw from your savings in order to treat yourself. Bringing you back to square one. If all you can afford each week is that £15 – £20 you saved on lunches, then great! Add that up over a year and you’ve got a little nest egg of between £780 – £1040. Not too bad, eh?

Tip 4: Get some help

If this is your first time budgeting and you’re worried you’ll struggle to maintain your new fiscal responsibilities, don’t fret. You can always turn to tech.

If spreadsheets aren’t for you, why not try challenger a bank like Monzo or Revolut. They’re free to join and have apps that will do a lot of the leg work for you. Both make it easy to set budgets and will even break your purchases into categories for you, simplifying the whole process for you.

 

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