It is essential for all individuals to write a budget plan. Understanding exactly how much income you receive and how much you spend, are the building blocks of financial freedom. Here are CB Benefitss’ top budgeting tips to ensure you do not spiral into debt but invest for your future:
- Write a budget plan
Simple advice we know, but yet statistics show that over 70% of UK individuals have not written a thorough budget plan.
- Take into account the big ‘one offs’
Have you ever arrived at the Christmas season and found yourself having to pay for gifts by credit card? Don’t make this mistake. Limit how much you will be spending on each individual, add up the total projected expenditure and put money aside monthly to cover the overall liability. For example, if you limit £25 for each individual and you have 10 people to buy for, you know you will need £250 (i.e. 250 / 12 = £20.83 per month). This goes for other ‘one offs’ such as car tax, MOT, holiday, etc.
- Farm out your liabilities
A good system to implement is to create separate accounts for different purposes. The day after you have been paid, you can farm out your liabilities to the specific accounts. Once the money has been farmed out and you have for example £400 left in your current account, you know this is the amount of spending money you have remaining for the rest of the month.
- Use cash
Ok so this goes against general train of thought, and this may not be right for everyone, but cash still has a part to play in modern day society. This is especially true in regards to budgeting because it is tangible (i.e. you can see and feel it). Conversely, how many of you have gone to the cash point near to pay day only to find out you have gone into or over your overdraft? With cash, you can withdraw your weekly allowance at the beginning of the week and once it’s gone it’s gone. Just be careful not to flash the cash in public for obvious reasons!5
- Where can you make savings?
Establish the areas you are wasting money. Let’s look at a very simple bit of maths. If you buy your lunch for every workday of the year then this will mean you spend approximately £1300 on lunch per year… How much would you save by making your own lunch?
- Use available technology
There are a range of tools available now to ensure you manage your finances. You can view the balance of your accounts via apps on your phone and a great exercise is to set up text alerts so the bank can text you when you get near to your limit.
- Be realistic
When budgeting, do not stretch yourselves. You need to make sure whatever expectations you set yourself are sustainable because if they are not, individuals are programmed to panic and make rash decisions such as stopping ‘them savings contributions or pension contributions’ immediately.
- Review your plan
Things change and it is important to regularly review your budget plan and your spending habits. We recommend half an hour on a weekend but at worst, once per month.