Why budgeting is essential to make your money go further
In these times of rising prices and spiralling bills, it is more important than ever to have a handle on your personal budget. This not only helps you to avoid getting (further) in to debt, but it also helps you see things more clearly. You can then see how to save money and take appropriate action, or to increase your income. In this article, we look at why budgeting is essential to make your money go further.
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So what is budgeting anyway?
Budgeting may seem complicated at first, but it really is very simple. It’s really just a list of all of your incomings and outgoings. It lets you compare “what’s coming in” with “what’s going out” so that you can take action to balance the two sides.
Firstly make a list of any and all income that you have coming in. You can either do this for yourself (if you live alone or in a house share) or for everyone (if you are a family). Remember to include information about how often these payments come in – weekly, fortnightly, monthly, annually, etc. Don’t forget to include:
- income from employment (full time, part time, casual)
- income from benefits (universal credit, housing benefit, child benefit, disability benefit, etc)
- income from pensions
- income from side hustles (online surveys, occasional jobs, selling on eBay, etc)
- income from savings
When you have your list of income, decide whether you want to make a weekly, fortnightly or monthly budget. Either is fine – choose whichever makes more sense to you. Make sure that all the figures that you are looking at are for the same period. For example, you may get paid from a job weekly, but you may also get benefits fortnightly. You can therefore count half of the fortnightly benefit payment in your weekly budget.
Secondly, make a list of all of your outgoings. Again this can be just for yourself or for everyone in the household. Make sure it matches the list of your income. There is no point doing a budget with income for your whole family and then only considering your own personal outgoings! Make a note of how often you pay each outgoing (weekly, fortnightly, annually, etc). Here is a list to help you to remember everything:
- rent or mortgage
- service charges (for your property)
- water bill (or rates)
- credit repayments (loans, credit cards, buy now pay later, etc)
- groceries (include household supplies such as cleaning supplies, etc)
- insurance (home, car, pet, cycle, mobile etc)
- transport and/or fuel for your car/moped/motorcycle
- mobile phone bill
- landline bill and/or internet supplier
- TV subscriptions and TV licence
- other subscriptions (gym membership, Amazon Prime, food delivery, club memberships, etc)
- take aways and/or eating out
- lunches at work, coffee’s etc
- entertainment – drinks, cinema, hobbies, etc
- pet costs (food, treats, vet bills, toys, etc)
- anything else that you spend money on regularly
Once again, you need to make sure that your outgoings period matches your income period. So if you converted all of your income to weekly figures, you should do the same for your outgoings.
Work out your totals – and what to do next
Next you should add up all of your income to get a total income figure, and do the same for your outgoings.
If your income is lower than your outgoings – how to save money
This is not the best scenario. But don’t worry – there are things that you can do. The main thing is that you have taken an important first step to getting control of the situation. By creating your budget you can begin to see why budgeting is essential to making your money go further. Re-check all of your figures, and then start to look at your outgoings, one by one. Is there anything that you can cancel, reduce or change so that you spend less?
You may have to be quite strict with yourself here. Perhaps you need to cancel some memberships or subscriptions, or find a better mobile deal. Or you may need to take lunch to work, or stop buying coffee when you’re out. Every little helps when it comes to saving money. You can also look at ways to make your money go further – buy fewer ready meals, cook more from scratch, etc. Also, review your income and consider whether you can make extra money to supplement what you already have.
If you have multiple debts to pay, you could look at debt consolidation. This means taking a loan to pay off your debts so that you only have one monthly repayment. You could spread the payments out over a longer period, or at a lower interest rate than you are already paying. Consider online borrowing options before doing so.
If your income is greater than your outgoings
This is a great start. If you haven’t already done so, you should look at saving the excess income that you are not spending. It’s good to have a fund of about three times your monthly income to cover any emergencies. You can also review your outgoings to see which ones you could cut back on or change to further your savings progress. Similarly, consider your income and whether you can increase this to put yourself in an even better position.
We hope this article has helped you understand why budgeting is essential to make your money go further. Do you have any other budgeting tips? Let us know in the comments below.
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