Making some small changes can have big results.
Learning how to create a successful budget is an essential skill for those of us who want to have independent control of our finances. Calculating your outgoings each month and making some small changes can have big results, helping you save significant chunks of money each year.
A budget can also help you better prepare for life’s unexpected emergencies while also keeping you on top of any debts you may owe. Discover The Mind Map’s simple budget tips below.
The best way to begin a new budget plan is to create a list of your monthly expenses. Start with a blank piece of paper or a spreadsheet on your computer and write down all of your outgoings in an average month, both big and small. These can include household utility bills, groceries, tax, car insurance, holiday savings, restaurant bills, rail card or bus pass fees, and any spontaneous purchases.
Alternatively, use a budgeting tool to help you calculate your spending. Most UK banks offer free budgeting apps to their current account holders, or check out this free online budget planner from The Money Advice Service.
Once you have discovered how much money you typically spend within an average month, compare this figure with your monthly income. Are you spending more money than you receive in your pay packet? If so, then it is likely time to make some changes.
Check your list of monthly expenses or your bank statement to discover which areas of spending to cut back on and save some cash.
It may feel daunting to cut back on bigger expenses such as utility bills or car insurance, but there are tools out there to help. Use price comparison websites such as MoneySuperMarket, Compare The Market, or uSwitch to discover if you could be receiving a better deal on utilities like broadband, gas, and electricity or insurance deals for your car, home, and travel.
Smaller expenses can also add up, so make sure to look closely at your monthly direct debit payments and contactless card payments. Cancel that Netflix subscription or gym membership that you never use, swap your lunchtime ‘Meal Deal’ for a homemade packed lunch, kick your coffee habit and choose instant over barista, and cycle or walk to work if possible to save on commuting fees.
You are more likely to be motivated into saving money if you set a savings goal to work towards. This can range from a few hundred pounds to put towards a holiday, right the way up to several thousand for bigger expenses like a new car.
Many people set their first savings goal to gather money for emergency situations, such as an unexpected bill or replacing broken household appliances. Each month, place a set amount of money that you can afford to put aside into an easily accessible bank account. Repeat this for three months and see how far you can save, but don’t be discouraged if you cannot meet your goal.
We all know that life can send surprises our way, so flexibility is often key when it comes to successful budgeting. Set aside small amounts per month – even as little as £5 or £10 at a time – and add to your savings in case of emergencies.
Once you feel confident with setting out your spending and creating a strong budget, remember to review your plan every couple of months. You may find that your bills have increased, or that all of your careful planning has left you with some cash to play with.
It is especially important to reassess your budget if you are lucky enough to receive a pay increase. This will allow you to be more generous with the amount you save each month.
If you have taken out bank loans, student loans, or make frequent credit card purchases then it is essential to keep track of how much money you owe to lenders. It can become daunting and stressful when these debts add up, but taking the first step towards repayment will help you stop your debts spiralling out of control.
Paying off debts that charge the highest amount of interest can be the most sensible step in the budgeting process, but also ensure that you make any minimum payments required too. Check all agreements with your bank to be clear on the terms of your loan.
If you feel like your debts are getting beyond your control, it is essential to seek help as soon as possible. There are a number of free charities and services that can assist you with your finances and help you get back on track.
Check out The Mind Map’s list of debt advice resources for more information.