Why is budgeting helpful?
OK , so it might not be the most exciting topic in the world but creating a budget -knowing how much money you’ve got coming in and going out, really can help to reduce your financial stress and anxiety.
Building healthy spending habits such as saving rather than using credit, taking time to think about your wants vs needs, being aware of scams and being a savvy shopper is what it’s all about.
Sounds like alot? Don’t worry! We can take you through – step by step – until you feel confident.
Here’s some more reasons why creating a budget can help you today:
- Reduces financial stress and anxiety
- Helps you understand your spending habits and make changes if needed
- Keeps you out of debt
- Helps you work towards you saving goals
- Helps you manage when unexpected things happen
- Allows you to be in control
How to budget
Step 1: getting ready
You’re going to need to get organised and gather all your information together in one place. This is going to take time. So set yourself a small goal each day over a week or so – we don’t want you losing heart/interest before you’ve got going.
As many things are online now – from pay slips to benefit accounts, energy bills to council tax you’ll need to have a system of how you’re going to gather all the information together.
This could be downloading files or taking screen shots and saving them all in one place – or getting a pen and paper and writing it down; it’s up to you.
Step 2:your income
The information you are going to need will include:
- What you earn through working- this could be your monthly or weekly pay slip after tax
- Any benefits you receive
- Any pensions you have
- Any other regular income you have – e.g. from a lodger
Step 3: your outgoings
Start with things that tend to be regular payments.
These things are slightly easier to track and gather together
- Rent or mortage payments
- Council Tax
- Gas/Electricity Bills
- Water Bills
- Phone Bills
- TV Licence and Streaming Services
- Other Subscriptions
- Insurance (house, car, pet etc)
- Car Tax
- Childcare Costs
Next, look at things that can vary in amount/frequency:
These things are about day-to-day living, but it can be difficult to know how much you spend each month. Particularly if not using cash. The best way to understand what you’re spending and where, is to either keep a spending dairy or use an app on your phone.
There’s no judgement here – so try and be as accurate as you can – make sure you include that coffee, the little treat for the kids or the Friday night takeaway.
- Grocery Bill
- Travel (bus/train)
- Clothes
- Hair/Nails etc
- Hobbies
- Going Out
- Take aways
- Holidays
- Presents/Christmas
- School Uniform
- School Trips
- Smoking/Vaping
The key to this working is to be honest and track your spending over a month or so as no week is the same. Think about those one-off costs as well – birthdays, Christmas, weddings, vet bills, going out.
Step 4: create your budgeting template
So now you have gathered all the information together – you need to enter all the details into a budget template. There are two ways to do that…
Option 1 – download the budget template and enter the details manually.
This is more difficult (but not impossible!). You will need to make sure that you have converted anything that is a weekly income or expenditure into a monthly one – and also anything that you pay annually into a monthly amount as well. Watch the video so that you can see how to do this.
Once all the numbers are in your template you need to add up your monthly income. Then add up your monthly outgoings. And then take your outgoing away from your income. Then you can see if you have any money left at the end of each month.
Option 2 – use an online budget template
The easier way is to use an online budget template that will do all the workings out for you!
Here are some examples of online budget templates that you can use:
End results
First of all – well done! But now what? Well, there are three possible outcomes:
-
- Your budget balances – the income you have covers all your outgoings but you don’t have any money left over at the end.
Get help > - You have money left over at the end of the month. Great! Well done! Think about setting up a saving account – See our information on bank accounts and saving accounts.
- You’re spending more than your income – this isn’t so great but we know that this is the reality for alot of people at the moment. The good thing is that now you know where your money is going.
See how TOP TIPS to think about how making a few changes here and there could help you build up that buffer >
- Your budget balances – the income you have covers all your outgoings but you don’t have any money left over at the end.
1. If your budget balances
If your budget balances – the income you have covers all your outgoings but you don’t have any money left over at the end.
This is an ok position to be in – you’re not building up any debt. But equally you’re not able to build up any savings for the future. It’s helpful to have a bit of a buffer – for when the car breaks down, you’re off sick from work and only get statutory sick pay or you really want to go on that dream holiday that all your mates are going on.
See how TOP TIPS to think about how making a few changes here and there could help you build up that buffer.
2. If you have money left over at the end of the month.
Great! Well done!
Think about setting up a saving account – see our information on bank accounts and saving accounts.
3. If you're spending more than your income
This isn’t so great but we know that this is the reality for alot of people at the moment. The good thing is that now you know where your money is going.
