It can be a good idea to learn how to budget your money. This can help you to more easily makes ends meet and afford the things that you need to pay. It can also be used to help you to pay money into a savings account or to repay debts. Therefore, it is something well worth knowing about. There are different techniques that you can use, but they are all pretty similar.
Note What You Earn
You need to start with making sure that you are aware of you
r current situation with regards to what money you have coming in. Most of us just think of our wages or salary but there may be other money that you have coming in as well. Think about these sorts of things as well:
- Interest on savings
- Return on investments
- Child maintenance
- Monetary gifts
- Self-employment income
- Income from renting out a room/driveway/garage in your home
Some parts of your income may always be the same (at least during the course of a year) such as benefits and salary but others may change. It is good to come up with a range so a minimum and maximum figure that you wo
uld estimate that you would get.
Note What You Spend
Then you need to note down
what you spend. It is important to think about yearly spends as well as monthly ones. You will need to include everything such as:
- Food, household items and toiletries
- Car (MOT, service, insurance, fuel, breakdown cover) and transport
- Clothing and accessories
- House and contents insurance
- Entertainment and hobbies
- Charity donations
This is just an example, there are likely to be more things than this. You can find out some of the items from your bank statements and credit card statements, although you will find that some items you may buy with cash. This is harder to keep track of. You bank statement will tell you how much cash you withdraw, but it could be worth noting down what you spend it on, if you find it hard to remember. You could keep a record for a few months, writing down everything you buy and how much it costs. This might seem a bit tricky, but it will be worth it as you will be able to identify where your money is going.
See Where you Can Cut Back
Once you have these figures you will be able to see how much you earn and spend and work out the difference between them. It is likely that you would like to have some extra money, whether that is to repay debt, to put in a savings account or to make bills more manageable and having this information will allow you to start planning how you will do this.
It can feel difficult as you will feel like you do not want to give up things that make you happy. However, you may find that there are things that you can cut out or change, that will not make that much of a difference. For example, it can always be a good idea to see whether you can switch brands, suppliers, insurers etc and save money. You may be on contracts that you cannot change, but if you are not, then it is worth taking a look to see whether it is worth buying elsewhere. Looking regularly, perhaps every six months or a year, can be worth it as you could end up saving lots of money. If you switch suppliers or insurers, you will not even notice any difference apart from paying out less money, so it is well worth doing. It can feel a hassle, to compare prices on everything that you buy. Start with the expensive things such as insurance, but also look at smaller things. Even if you save a few pence on each item in your supermarket trolley, this will add up through the year. You may not think you will like different brands or buying from different places, but it is worth a try because you could end up saving a lot of money. You may find, for example that swapping coffee brands saves lots of money but the taste difference is worth it and you may even find that you prefer the flavour of some cheaper products. You may end up going back to some more expensive brands, but by trying heaper items and looking at the price differences, you will be able to work out what is worth changing and what is not. You could find that you will be able to save quite a bit of money.
See Whether you can Earn More
You should be able to identify whether there are any areas where you can cut down. It may be that you cannot cut down as you only buy the minimum or that you cannot cut down enough to make a significant difference. In this case you will need to work on identifying areas where you might be able to make more money. This might seem difficult but there are different options that you could consider such as:
- Asking for a pay rise
- Trying for a promotion
- Changing jobs to a better paid one
- Doing overtime
- Selling things you own to make money
- Setting up a small business in your free time
- Moving your savings and investments to places that give a better interest rate or return
- Checking if you can claim benefits (or additional benefits)
Some of these things are easier than others, but it is worth considering what to try as you could find that there is a way there, that will generate you a lot of extra income and will not take that much effort or will be well worth the extra effort.