At the request of a number of my friends and family, over the next few days I will be focusing on how to create and manage a monthly and annual household budget. If you know this is an area you could use some help with, or you just want to take a look at how I manage my finances, then stick with me.
On day 3 I’ll be giving an example of a weekly shopping list and meal plan, maybe with a couple of recipes too. I hope you will find some of my advice useful. Oh, and by the way, I haven’t always been this organised with my budget. I used to live with my head in the sand where finances were concerned. So if I can do it, anyone can!
Right, it’s time! No more procrastinating, no more excuses. I’ve heard them all before, mostly because I came up with them!
“I’ll do it in the morning, when I’m fresher”
“Actually, I’ll do it tonight, when the kids are in bed”
“I’ll get more done if I do it this afternoon, when the baby’s napping”
“The house is messy, I’ll be able to focus better when I’ve tidied”
…and about a hundred more!
Let’s face it, there’s never going to be a perfect moment to set aside the time to go through the frankly tedius task of sorting out your finances, facing up to some potentially harsh realities, and putting a budget into action. But let me tell you, it will feel so much better when it is done!
If you have been living in denial, with a cloud hanging over you. If you are worrying every time you spend money! Maybe you’re scared to check the bank balance, dreading the letter dropping onto the mat, telling you you had incurred charges for going over the overdraft limit. Again…Maybe you aren’t that bad, but this was me about 4 years ago. These days I prefer to know what’s what. I find I generally enjoy life more, and get a better night’s kip, when I keep track of, and ultimately take control of my finances, rather than being controlled by dread and fear.
Once you have worked out your monthly Outgoings and Incomings, you may find that the situation is not as bad as you anticipated, or it may be worse. If that’s the case at least you will know which areas need to be dealt with. Maybe you have been spending too much on food or clothes or credit card debt. You might even realise that you need to seek further help. I will give details of organisations that can help, if you feel overwhelmed by debt. The main thing to remember is that IT IS GOING TO BE OK. Today is a good day. Let’s get started…
Now, I’m not saying that the way I control my money is the only way, but it works for us. It is very low-tech!! (I have never made a spreadsheet in my life) It doesn’t take too much brain power, a simple calculator, paper and a pen will do the trick. What you will need to do is find a recent bank statement, or register for online banking if you don’t already have it. However, February’s statement isn’t going to be the best one to look at, as we don’t tend to pay council tax, water rates and some other bills in February or March in England. See if you can find one from a couple of months ago for a more comprehensive list of your incomings and outgoings.
1. Work out your Monthly Incomings
Write down all your outgoings down one side of the paper, I have given examples of most of ours. For obvious reasons I have neither included all of them, or the amounts. If you are not sure how much you spend on food each month, you are going to have to make a conservative estimate for now. You can always tweak the amount a bit later on.
If you have any bills that you pay quarterly or annually, you can leave them out of this section and budget for them in your ‘Annual Budget‘ which I will be talking about tomorrow.
2. Work out your monthly Incomings
Include wages/pension/, income support, any tax credits, benefits and other regular incoming payments. Anything that is not regular might be best treated as a bonus or put into savings, especially if it can’t be relied upon. If wages fluctuate from month to month, again, assume the worst case scenario, or calculate an average amount.
Now deduct the outgoing total from the incoming total. At this point I will assume you have a positive, rather than a negative figure (I.e there isn’t a minus sign in front of the number!). If it is a negative figure it’s time to look at what you are spending each month, and see if any changes can be made. If it looks really bad, and you can’t see any areas that could be cut…if you are feeling really stressed out at this point, and like you need to breathe into a paper bag…can I suggest a great debt counselling charity? They’re called CAP (or Christians Against Poverty). You can find them at capuk.org I hear they are amazing!
So, whatever is left once you have deducted the outs from the ins, is for what I would class as non-essentials
This section is also for pocket money, if applicable, for kids and for grown-ups. This is for buying coffees, or a night out with friends, or magazines/books/CDs etc.
For us, this fund tends to be one that gets cut first if a bill goes up. So one month it might be £10 each, and another month £20, depending on how flush we are. Needless to say, we don’t get out much!
I have some news for you…actually, you might have already heard. Christmas Day is on the 25th December. Every year! Who knew?! Why do so many of us let it creep up on us? Saving a little each month throughout the year can take so much of the stress out of the festive season. Work out a rough budget, based on how much you want to spend on presents, food, the tree, wrapping paper, visits to Santa etc, etc. Then divide the total by 12, and save that much each month.
I have labelled it ‘Extra Expenses‘, but I should have called this section ‘Annual Budget‘ as this is the money set aside for things like kids’ clothes, shoes haircuts, toiletries etc. I will go into this in more detail tomorrow.
The last two sections: Home Improvement and Savings are quite self-explanatory. If we have money left over after all of the other areas have been sorted out, we can set some aside towards things for the house, a holiday, or something we want to save for. It might be a good idea to open some extra savings accounts with your bank. We use ours like money pots, transferring funds from the different budgets Online. So one would be for Christmas, one for the Annual Budget, and one for general Savings.
I regularly update my monthly budget. Especially if a bill goes up or down, or if circumstances change. I’d recommend you write the date on it, so you know you are looking at the most up-to-date version.
Tomorrow I will go through how to calculate an Annual Budget, which covers expenses such as Car Maintenance (essential if the dreaded car tax creeps up and stings you on the bum once a year, or even worse, that unexpected repair bill!), after-school clubs, clothes, hair cuts, dental care etc.
Until then, please feel free to ask any questions. I hope this helped. See you tomorrow.