Friday, 30 August 2019

The Money Tree- How I learnt to budget the hard way

There has been a lot of attention towards saving money of late, what with Lloyd's Bank, "talk about money" campaign and the recent television advert regarding saving money on payday, but why has this suddenly come around?

It is no secret Money is a complicated, stress related, life controlling and daily occurrence for us all. Even those with multiple noughts after a few digits in their bank accounts I imagine struggle with money some of the time.

We have all experienced that moment when you press “show balance” at the cash machine, or log in to your online banking and are greeted by single figures, zeros or minus signs and your anxiously wondering how many days are left until payday.

Similarly, if your anything like me, you’ve counted how may weeks there are until the next payday on payday. You’ve just received that pay-cheque and your already wishing the next month away in anticipation of more money. Money related worries most certainly increase stress levels. There is tones of literature out there that highlights the facts and figures around how stressed money can make us, including that of the Mental Health Foundation who surveyed a little over four and a half thousand Brits, and found that three out of four people have been so stressed about money at least once (2017-2018) that they have felt overwhelmed or unable to cope.

For me, the question is; How do we prevent this?

My Answer: Budgeting.

I have experienced financial issues throughout my adult life and even now, I still work within a strict budget. This was not an easy task to take on, having spent my teenage years binging, over spending and not having any insight in to the value of money. It was a hard hitting habit that needed to be broken. For me, real issues began during my second year of university when I was no longer working and had to live the whole year on student loans, which are means tested and limited. Problems began early on in the year and I needed help from family who, gave me the best solution by teaching me how to budget. By taking budgeting as a step by step process, and using some of the tips below, I quickly found myself back on my feet.  

How I learnt to Budget: This works for monthly or weekly paydays. 
  1. Add up all of your outgoings for the month/ week. Your Rent, water and electric bills, council tax, phone bill. If you have debts, make a note of them and keep that to the side for now, we will come back to debts a little later. 
  2. Take this away from you monthly/ weekly wages. 
  3. With whats left, divide this by how many weeks/ days until your next payday. This will then give you your budget for the week/ day. 
  4. Then, you can start deducting travel exercises (petrol, bus or train tickets) and food. 
  5. If you have debts, you will need to pay these off and by incorporating it in to your budget, the debts are already less overwhelming. With what every money is left over after all your bills, food and travel expenses have been taken out, you can set aside the money needed to put towards your debt. 
  6. If you are able to, saving some money each time you are paid is really beneficial, even if's its only a few pence a week, this soon adds up.  Skintdad (8th July 2019) highlights the genius concept of saving just 1p a day and then increase the amount you save each day by 1p. Example, day 1= 1p, day 2= 2p, day 3= 3p. This could be done in weeks rather then days also. Over a 12 month period, we are talking between £667.00 and £671.00 saved. Yours. NO catch, just your reward. Think about what you could do with this? A few days away? maybe pay off some more debts? perhaps you've been thinking about a new sofa or decorating your bedroom. What ever it is, that money is yours and boy, doesn't it feel good? <br> Skintdad has some really useful ideas around the 1p challenge, along with free printouts, so be sure to check it out at : 
Whats left from your weekly/ daily allowance, if yours to enjoy yourself. Maybe a once a month cinema trip? a new pair of trainers? or lunch at a pub? whatever you choose, it's really important that you reward yourself, so you feel like you have a reason to carry on working. 

In the world of organisation, this is something I also had to learn. Organising money, saving it, keeping it separate and knowing where every penny is.

Some useful tips: 

  1.  Use jam jars or envelopes to keep money separate. Food allowance, petrol fund, bus ticket, pocket money. If you don't fancy old school methods, some banks (i know Natwest do) allow you to open instant savers for free. I have some of these and nicknamed them, transfer the money and leave it alone until you need it. This prevents over spreading. <br>
  2. Avoid spending loose change. For me, I collect 20p coins or less, put them in a bottle bank and let the "rainy day fund" grow. There have been a number of times in the past where i have needed to reach for the rainy day fund. If 20p and below is a stretch for you, use a lower limit, such as 2p's. The money soon grows and you'll be surprised how much you can save without realising it using this method. <br>
  3. Write your own weekly menu to avoid over spending on food. By working to a menu, I often come home with change which, you've guess it, goes in to my rainy day fund. If your worried about getting board of eating the same meals every week, great two or three menus and rotate them each week. There are loads of healthy food options out there that you can make without over spending- they taste great too. 
  4. keep a note book of what your spending, or if you like working on computers, keep a spreadsheet. This will give you accuracy of how much money is being spent and on what. 

Whether your new to saving money or have experience, it can be a minefield and breaking old habits to make room for new ones can be a hard challenge. AI have tried and tested all of the points I have raised today and found them all to be helpful. As you become more familiar and confident with saving and budgeting, you can tweak the ideas to suit your needs or, come up with some of your own- be sure to share your knowledge to help others. 

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