Remember I told you in my previous post about why budgeting is fab, that having a budget will reduce your stress, improve your relationships and give you a better sex life?
So now I’m going to give you some tips on how to build a budget, because it’s not always that obvious.
Plus you can listen to my dulcet tones again (lucky, lucky, lucky!) because I talked about this for Radio Verulam’s Drive Time show with Danny smith as part of my ‘Lifestyle correspondent’ role for them? (Sorry it’s such a posh title that I just HAVE to keep dropping it in the conversation!).
There are three steps.
1) Build a budget
2) Fiddle/Analyse the budget monthly
3) Create a fun plan for the future
1) Build A Budget
Ok, so this bit might not be the most exciting bit, but once it’s done, it’s done!
You basically go through your Direct Debits, bank statements, credit card bills, and other bills to get a view on what you spent last year.
MoneySavingexpert has a great spreadsheet if you want one that will make sure you don’t miss anything out.
Here’s a picture of how we build ours up:
Once you have Regular spends, average spends, debt and food and house sorted: i.e what you pretty much have to spend (although you might find that you decide to cut back on some of it or remove it once you see it written down), then the rest goes into:
Savings for Fun: holidays, gadgets, gifts etc
Savings Forever: rainy day, pensions etc
Pots: For you, your hubby and the kids
The Pots are where the ‘magic’ happens! You decide what a fair split is between you all, and then that is your limit.
But it’s no one else’s business what you spend there, so it can be spent without guilt or judgement. If he wants to spend it in the pub or on a gadget then fair enough. If you love shoes or handbags fine. It’s yours fair and square.
2) Budget Analysis
Each month (probably with a treat to encourage you, like a cuppa and a cake!), you go through how much you spent and compare it to the budget.
I’m telling you now IT WILL NEED REJIGGING! So don’t feel guilty or judge yourself for that; you are bound to have been a bit keen and optimistic!
Then look to see if you got value for money from the spends that you have a ‘choice’ over:
Look for where you overspent, where you could have cut down, and what didn’t give you the value for money.
Little costs: Check out the little costs like coffees and multiply them by how many times a week/month/year they happen. Are they really worth it?
Medium costs: Work out if they are worth the number of days it takes to earn them by taking your salary after tax/232 (full time working days) and seeing how many days it took to pay for them.
Costs that save money: If they save money, like our cars have done it might be worth it.
Debt: my rule of thumb is that it’s not worth going into debt for more than a season for pretty much anything.
3) Fun For The Future
After a while the budgeting will pay off and you will be able to look further ahead.
Sit down with a bottle of wine and DREAM!
What would you love to have done, seen or achieved by the time that you ‘kick the bucket’?
Maybe it’s a holiday, kids going to univercity, an extension on your house, or learning to drive?
This list is then great to compare to things you think of buying in between to see if they are really worth it, and to make sure that you have stuff to plan for and work for.
With debt you need to chunk it down to smaller units so that it seems more achievable e.g. £400pm is £100pw, which could be 2hrs of cleaning 5 days per week. Plus remember to be upfront and tell organisations, debtors etc that you are struggling and make the payments manageable. There are also organisations out there that can help you like the citizens advice bureau (I’m going to do some research and write a whole blog post about who can help you with debt problems in the next couple of weeks).
Here is my section on Radio Verulam with the lovely Danny smith (it’s 18mins):
So there it is, three easy steps, that might take you a little while to put fully into place, but will INSTANTLY make your life easier.
I really hope I’ve inspired you to have a go?
Let me know what you think? Any questions or any problems with it, I’m here, so you just have to ask!