If you are anything like me, setting a budget comes with its own troubles. While you might consider your average monthly spend, one-offs like birthdays, days out and your car breaking down might not even cross your mind. Budgets rarely work. They don’t allow for life’s unknowns to factor, and self-control is a pipedream.
With 5 simple rules, you can keep your budget in check. That way, when life throws you a curveball, you are more likely to be prepared to take the hit on your finances and not drown in your planning troubles.
Here are our 5 golden budget rules to get you on track:
1. Don’t spend more than your income allows
Too often, our outgoings are more than our income. When you tally up your rent or mortgage, electricity and gas bill, car insurance, and various other taxes, you might be already heading straight towards your bottom line. Throw in a month’s shop, and it doesn’t look like you’ll be going on your next mini-break after all.
Spending more than you earn is not a new problem, but curbing your spending habits inevitably goes hand in hand with the consumer-led society we live in. Major overspending can lead you into a debt spiral that comes with its own set of undesirable problems.
To give you the best idea of your outgoings, find a reputable budget planner online to get you started. That way, you can get a clearer picture of your baseline expenditure and highlight the areas you may need to cut costs. Budgeting isn’t plain sailing. But with the right tools, you can change your spending habits to suit your lifestyle, rather than the other way round!
2. Track your spending
Manually inputting every time you spend is not only boring but incredibly time-consuming. No one wants to be checking each and every receipt. We’re headed for a cashless, paperless society anyway, so now’s the time to grab hold of the reins and launch yourself into the future!
The easiest method of tracking your spending is by using one card – either debit or credit to keep an eye on your habits. As soon as you embrace cashless technology, the better you will become at keeping your bank balance happy. This allows you to have an automatic record of all your spending and never have the odd splurge moment with that wad of cash that’s been weighing your wallet down.
For extra help tracking your spending, there are a variety of budgeting apps that are available to download free of charge.
3. Know your monthly expenses
Having a log of all your personal finance and credit card transactions is great, it really is, but the most important thing you can do moving forward is to keep a tab on your fixed monthly expenses. This can look like this:
- Mortgage or rent
- Insurance and utilities
- Loan repayments – student, auto, furniture etc
- Minimum credit card payments
- Potential savings, investments or further debt payments
Now you have your fixed monthly expenses knuckled down, you want to think about the areas where you can reduce any outstanding debts.
Anything that is left over is your spending allowance. Use this for spontaneous trips, the occasional pub crawl or a treat. You get the gist!
4. The key to building a good credit score
Now that you’ve had a whistlestop tour of your finances, it’s time to think about how you can build a good credit score. To this day, the fancy furniture store down the road to your phone company will only let you get a hand on the goods you desire if your credit score sings your praises.
To build good credit, you simply have to make your repayments on time and never miss a payment. That’s it in a nutshell. However, even that’s not the end of the story.
What about those that have never had any credit, to begin with?
Companies are more willing to take a chance on first time credit or even those with a poor credit history than ever before. Everyone needs a second chance. Just by looking at the lucrative motor industry, poor credit car finance is increasingly giving more and more customers a chance to get behind their dream vehicle.
So dare to dream. Check out comparative prices online, allow for a soft search on your credit to have a look at what they can offer you. It’s only when you get to the final stage of a deal that a hard search is done on your credit – this is where your score is affected, but necessary if it’s the deal you want!
5. Draw up a budget you can stick to with confidence
By now, you should have an accurate picture of your average spending at your fingertips. With a failsafe for those one-off spends in place, you can draw up a manageable budget you can stick to with confidence. That way, you can pin down your average earnings and compulsory spending figures from the last three months. This allows you to map out the next quarter with a reasonable estimate of your likely spending.
Whether you have your eyes set on a big holiday, a special birthday treat, or a one-off that you’ve had on your mind for a while, your budget will be flexible to accommodate your needs with the right leg work.
But don’t forget to account for these moments. If you spend £100 a week on food and £40 on fuel, if you’re on holiday, you won’t be spending the same amount. So, bear in mind, “will I be spending more or less when I’m away?” Your budget needs to reflect your spending to be successful.
So say hello to achievable saving targets, a more comfortable disposable income margin and easy breathing!
Are you ready to invest in your future? By following these 5 simple steps, your budget will allow for any curveball life has to offer and leave you with a disposable income!
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