Every month, without fail, I work out our money to make sure that we are budgeting correctly.
Some people think that budgeting means that they are going to have to stop spending money on all the good things they do in life.
In fact it can be the opposite, as it quite often can increase the money you have to spend on the good things in life, as it stops you from wasting money on the things you don’t need.
For example, if you buy a £2.50 takeaway coffee, on your way to work each morning, this adds up to approximately £587 per year! I’m sure this money could be well spent on something better than cups of coffee. You could quite easily get up a little bit earlier and have a cup of coffee before you leave the house, or even when you first get to work?
Looking at where your money goes to each month is a good way to stop you from overspending.
If you do overspend each month, then you can find yourself very quickly spiralling into debt and paying more and more interest every month on credit cards, bank loans, store cards etc.
There is no right or wrong way to budget and it’s important to find a way that suits you, but this is how we do it:
At the very beginning, when I first started to budget, I listed down all our outgoings.
Here is a list of the things we budget for monthly:
Gas and electricity
Buildings and contents insurance
Food, toiletries, cleaning products, prescription charges
Mobile phone charges
Car expenses (incl petrol, breakdown service, MOT, services etc.)
School transport costs
Clothes and shoes (incl. school uniforms)
Girl’s karate expenses
Christmas and birthday presents
Spending money (for odds and sods, outings, etc.)
Absolutely everything above is budgeted for.
When I first made a list of outgoings, I hadn’t a clue what we spent on some of these things. For some things, I needed to look back at old bank or credit card statements and other things I had to check old receipts if I still had them. For example, I needed to look back at my last three months’ worth of food shopping receipts, so I could work out our average monthly spend.
I was lucky as I could work most of our expenditure out, but If you haven’t kept your receipts or statements, then it is a good idea to write down a list of every little thing you spend your money on for a whole month, so you know exactly where your money goes to.
This really is an eye opener and sometimes, even when you have been budgeting for years, it’s a worthwhile exercise to do again.
Afterwards, my husband and I looked at each of the things we spend money on and set a budget for them. Some things we knew exactly how much we pay for each month e.g. gas and electricity and other things were harder to work out e.g. christmas and birthday presents.
We then looked at our monthly income and took it away from our monthly budget, we found out exactly why we were overspending every month, as our income was far less than the amount we were actually spending.
At this time, I had just had my eldest daughter and I didn’t want to go back to work, so things really had to change. We sat down and scrutinised each and every category to see if the budget for that area could be reduced further. It’s amazing what you can do if you try hard enough.
We switched gas and electricity suppliers, cancelled magazine subscriptions, re-looked at our food purchases, stopped having takeaways etc. and eventually managed to bring our outgoings down.
One of the areas we did struggle on, was reducing our spending on christmas and birthday presents. Strangely enough, we did find it easy to spend less on each other and even the kids, but we have two large families and a large circle of friends and we did find it hard to reduce the amount of money we spent on presents for other people.
We did try and explain to people that we just couldn’t spend the same amount on people anymore and most people were fine about this and understood, but not all did, which hurt at the time. Since then I’ve realised the opinion of the people concerned, really didn’t matter anyway.
I’m not saying it was easy at the beginning, as it wasn’t. In fact, it is hard to cut back on your spending when you are used to buying whatever you want to, whenever you want, but in time your attitude towards money does change. It can actually become a challenge each time you need to buy something and to spend less on it than you are expecting to pay.
Since we first made a budget, we have always kept a close eye on it and we have made changes along the way. For instance, shortly after my first daughter was born, we worked out that we couldn’t afford another baby on the budget we had, so we needed to find something quite substantial to cut back on. We decided our car was not a necessity, but a luxury, so we sold it! It was hard to adjust at first, but after a while it didn’t seem so bad and I went on to have another beautiful baby girl.
Today, my daughters are nearly 15 and 13 years old, so budgeting is a normal way of life for us now. We have our ups and downs with money still, but we are certainly more prepared for emergencies now than we were before we budgeted years ago.
I will be writing about our birthday and christmas money saving, in the future. For the moment, you can read about ways to reduce your food shopping bills here and ways to reduce holiday spending here.
You really can still enjoy life on a small budget, you just need to look at things from a different perspective. You don’t have to be the same as everyone else and keep up with the ‘Jones’, in fact it can be more fun to actually do things differently.
Finally, if you are struggling with debt in the UK, please do not contact a debt specialist that charges to help you to solve your debt problems. There is a wonderful free website with all the information you need to know when you are in debt. It gives details of people that will give you advice, free of charge. It is called ‘The Money Saving Expert’ and you can find it here.
Thank you for reading my blog today.