Budgeting: An inconvenient reality.
Budgeting - the mere mention of the word makes me cringe, unless of course it’s government spending we’re talking about. In a time where prices are increasing every day and belts are tightening, it’s really important to know exactly where your money goes. I am no expert on this by any means, but this will walk you through how we created and handle our budget.
I wish it’s something we’d done and figured out before we ever got married as it’s true what they say - money does cause the most arguments!
Month 1
Come up with a first draft budget. Look at what you normally spend in a month. Take into account regular outgoings like TV, Internet, Insurance, Rent/Mortgage, loans, credit cards as well as variable expenditures like petrol, groceries and entertainment.
It does not have to be exact, just a very rough estimate, this will be refined as you move forward. Look at last month’s bank statement for direct debits and standing orders to make sure you have everything covered.
Make a list of all incoming money - salaries, children’s allowance, rebates etc.
Compare your initial outgoings to incomings. Is it realistic? Do you find that you should have a lot of money leftover at month end based on your intial figures, yet in reality you rarely do? If so, look again at your outgoings. Is it really indicative of what you spend? Think that morning coffee, lunch on the go, newspapers etc. Refine the list as necessary.
Start tracking your expenditures. This means receipts, receipts and more receipts. Get a receipt everywhere you go and bring it home with you to track. You can use something as simple as a ledger to an excel spreadsheet. Personally, we like the Pear Budget, an incredibly simple online application that we can access anywhere.
I find it’s easier to work with a laser card, as you are more likely to keep or even get a receipt.
Keep track of all your outgoings for the month. At the end of the month compare your actual expenditures to your first draft budget.
Month 2
Redo your budget based on the comparison between actual outgoings and predicted outgoings. Generally you will find you spend a good bit more than you thought. That’s ok, just re-adjust the budget and go at it again.
Track all expenses during the month
Compare your actual versus predicted again at the end of the month.
Month 3
Refine your budget again if necessary, but you should find you’re not too far off. This is the time where you can start setting goals. Are you spending too much on groceries? Figure out where you can save. Maybe you want to call around and save on insurance? Whatever it is, name a goal and work on it this month. At the end of the month if you meet your goal, put the money saved on a credit card or loan or into a savings account, or even treat yourself to a night out. It’s up to you and will be dependent on your personal financial situation.
Continue to track and continue to refine.
Month 4 and beyond
At this point the previously painful receipt input should be fairly automatic. Keep at it. It’s an excellent exercise in restraint and a fantastic way to know where your financial situation stands at any point in time. Keep setting goals and tracking your progress. You will be amazed at the difference this makes in your life and to your bank balance!
What are your budgeting tips???
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I tend to download my statements from the online banking, categorise the outgoings into different types of expenditure (bills, groceries, loan payments, etc) and bung up a pie chart. Helps me visualise where we might be over-spending and where we could cut back.
That’s a great idea TC, never even occurred to me! Would be hard to account for cash payments though… himself is a pain when it comes to cash… he’d rather use it than the laser! I keep meaning to say, that if you are interested in blogging here, you’re more than welcome. Would like to see it becoming a larger group blog with lots of people sharing advice!
Will do. No ideas just at present though.