Effective monthly budgeting tips - How to make your money go further each month
Putting in place an effective budget and sticking to it each month can make an enormous difference to your life. It may seem like a headache to have to spend time working out a budget, but it really is one of the best ways to help free yourself from debt, improve your credit rating and, ultimately improve your opportunities. The Moneyboat team looked over some key options and put them together for you here!
Where to start with making a budget - help is at hand
Initially, our first tip is to work out whether you are spending more than you have coming in. If you are overspending, it’s important to establish how much you are overspending by and where your money is going.
Before you start to work on creating a monthly budget, the first thing you should do is work out how much you are spending each month and on what. You can do this simply by writing down every purchase or payment you make. However, there are apps that will help you to record your payments quickly and easily and they can even illustrate where your money is going through handy infographics. This helps to break the information down in a way that is easier to digest and the visuals can help you to identify areas where you may be spending more than necessary. This is the first stage of budgeting.
Some of the best budgeting and monthly spending-tracking apps out there include:
Some of these budgeting tools simply allow you to track your spending, allocating each payment made, either in cash or from your bank card, to a category. However, others allow you to create budgets and plans that can encourage you to stick to a spending limit each month or week.
A good tip is to take a look at a few options and find one that ticks all the boxes you need. We would recommend starting out with a simple tool that helps you visualise where your money is going.
Once you’ve identified where you are overspending it’s time to start cutting costs…
Budgeting tip 1: Save money where you can
A good place to start when creating a budget is with making meaningful savings on your bills. Look at the amount you spend on utilities, media and servicing debt each month.
Saving money on your utility bills
There are some incredibly useful tools out there to help you get a better deal on your gas, water and electricity. You no longer have to call around for quotes, or listen to pushy salespeople. You don’t even have to check league tables on comparison sites. Instead, a good tip is to sign up to a service such as Energy Monitor, by Moneysupermarket.com.
These services are completely free and will carry out searches on your behalf and even take care of the switching for you. For anyone who does opt to switch to a new provider, you have 14 days to change your mind.
Saving money on your media costs
Over recent years, the amount we spend on streaming services, tv and broadband has increased. It’s easy to sign up to expensive packages with providers that you later regret and find it hard to get out of. However, a quick call will often save you tens of pounds each month. It’s also worth reviewing the streaming services and channels you subscribe to and consider whether you really need every single one. If you don’t use a subscription, cancel it.
Saving money on your debt and loans servicing
One of the main debts we often have to service each month is our mortgage repayments. This is the largest monthly outgoing that most of us have and, for anyone who isn’t signed up to a fixed contract, it should be the first place you try to make savings. If you are able to move to a different mortgage provider, or if your home has increased in value since you bought it, you could be looking at savings worth several hundreds of pounds each month.
It may be worth talking to a mortgage broker to try to find the very best deal when seeking to save cash on your mortgage repayments. Finding a new mortgage that will cost you less each month isn’t always easy, and it can require an awful lot of work. Therefore, in this case, working with a broker can be worth the extra cost - particularly if they find you a deal that would be suitable for you quickly. The sooner you can switch mortgages and start saving money, the better.
Budgeting tip 2. Be realistic - including ‘fun money’
Although it’s tempting to try to drastically reduce ‘unnecessary’ spending when creating a budget, you do need to allocate money for things that you may view as frivolous, such as clothes, holidays, leisure activities and eating out. If you fail to allocate budget to these expenses, you’ll just end up spending money on these things anyway and will blow your budget.
Instead, take a look at past spending and work out how much you typically spend on non-essentials. The best approach is to try to cut this cost by a certain percent, to try to help you get your spending under control. Perhaps reduce the amount you are spending on these areas by 20 per cent, but then stick to this religiously.
Budgeting tip 3. It will help to account for every penny, every month
When you’re working out your budget, account for every penny coming into your account each month, If you fail to do this, you may end up spending the unallocated money on things you don’t need.
Although allocating every penny is a good idea, this doesn’t mean you need to spend every penny in your bank each month. Instead, allocate a certain amount to your savings account or to clearing debts, for example. It might be a good idea to put this money into your savings or pay off the debts at the very beginning of the month, so you have no choice but to start reducing debts and getting your spending under control.
Budgeting tip 4. You may need to make adjustments your budget or spending goals
After the first month or two, you are likely to find that your initial projections for how you spend money are slightly inaccurate. Therefore, it’s a good idea to review your budget at this stage. If you realise you are still spending more than allocated on socialising, for example, increase your budget for activities and eating out next month, but find the cash needed from another area of your budget where you feel you could spend less.
For example, if you have overspent on your budget for eating out for two months in a row, but feel you could save money on clothes, move some money out of your clothing allocation to the eating out allocation. It doesn’t really matter where you spend the money, it’s about how much you spend overall. Tweak as you go to ensure the budget works for you, or you won’t be able to keep to it.
Budgeting tip 5. Remember to account for annual expenses
There are some significant expenses that we all have to meet at certain times of the year. These aren’t monthly expenses like rent and utility bills, these are costs that only really come out of our banks once or twice a year like holiday costs, Christmas/birthdays and annual subscriptions.
Although these costs aren’t payable each month, it’s a good idea to allocate funds to these costs each month so that money is available to pay for them when they arise. Spreading the cost equally like this can also help you to organise your money better and avoid getting into debt at certain times of year when the financial strain gets too much.
Budgeting tip 6. Create an ‘other’ category
Some costs are really hard to predict and even harder to allocate into categories in advance, This is why it’s really useful to create a category in your budget for ‘other’ items that do not fall neatly into one of the other regular categories.
People who fail to create an ‘other’ or ‘miscellaneous’ category start to allocate spending on these random items to other, incorrect, categories, which can leave you with an inaccurate impression of your spending.
Whatever your reasons for creating a budget, sticking to it is the key to financial harmony. Successful budgeting comes from an ability to gain a clear view of your spending habits, being honest with yourself and having the organisation and willpower to stick strictly to your spending plan.
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