How to budget in a cost of living crisis -AD

Ad – The cost of living crisis has made managing your money harder than ever. In case the pandemic wasn’t depressing enough, we are now stuck indoors again but this time wearing three jumpers and trying not to look at the smart meter.

Even if you have never had to worry about money before, the chances are that you are noticing the squeeze. Bills are on the up and wages are staying where they are.

If you’ve never budgeted before, then this could be the answer. Carefree days of spending until it runs out are gone and creating a budget could be your way back to financial stability.

Why is budgeting so important?

Budgeting gets a bad rep. When you think of budgeting you might think of cutting back and going without. It has become synonymous with being cheap, but that’s not what a budget is about.

A budget is a plan. It shows where your money is going from and where you want it to go. It is the map that you use to get your finances from where they are to where you want them to be.

Imagine setting out on a long, unfamiliar trip with no map and no sat nav. You might get there in the end, but you will likely take a few wrong turns on the way.

A budget makes the process easier. It gives you clarity on your money and most importantly gives you control over your finances. No more winging it. It is time to put some systems in place.

Can everybody budget?

Yep! There’s a budget out there for everyone, including you.

You might think that you can’t budget because you don’t earn enough or you are self-employed or you get paid irregularly. Well, the good news is everyone can budget.

The main problem is that you likely weren’t taught how to budget in school or by anyone since. Not only that but your budget is personal to you. Hence why it is called personal finance and not general finance.

Like all things, it takes some practice, but this article contains several helpful pointers to get you on your way.

Knowing your numbers

A budget isn’t about guesswork. It is about truly knowing what money you have coming in and what you have going out. Over the last year, rising inflation has probably meant that some of those numbers have changed.

If you are new to budgeting, then a good place to start is by looking back at your bank statements over the last few months. What money came your way? Your salary? Benefits? Bonuses? Something else? Make a list of all the money coming in, where it came from, and when.

You need to do the same with your outgoings. Look at the regular payments first, such as mortgage or rent, utilities, debt repayments, and mobile phone bills. Then look at the variable costs, such as food, travel, and entertainment.

Be honest with yourself

Looking back over those old statements can be hard. You might identify patterns in your spending that you are less than proud of. But pretending that you spend £200 a month on food for your family rather than £600 reality will set you up to fail.

You can be honest whilst also recognising that you could improve your situation. It is important though that you start from where you are at. Trying to live off £200 of groceries when you are used to £600 will make you hungry. In those situations, you’ll be far more likely to ring for a takeaway.

Get a system

A budget is no good if it only exists in your head. You might be one of those people that say they’ve got it all sorted in their head, but you’ll find things a lot easier if you have them written down somewhere.

Your budgeting system is personal to you. You might be a pencil-and-paper sort of person, or perhaps you like to use tech (more on that in a bit). It might be worth experimenting with the different options that are out there to find the right fit for you.

Gamify your savings

With your system set up, it can become a fun game to try and challenge yourself to spend less and less. Or alternatively to save more and more.

One way of doing this is to highlight an area you want to work on. This could be your food spending for example. Then for the month ahead, you go all out to try and lower your spending in this area as much as possible.

Then the following month you try a different area. This could be something such as your utilities or even your mortgage or rent. You will find yourself getting creative about how you can lower these costs and keep them down. It can be a fun game to get the whole family in on too.

Use tech for simplicity

If all of the above sounds like a chore, then you’ll be pleased to learn about Moneyhub. Through this app, you can connect your bank accounts and it will provide you with a tonne of information about your income and spending.

You can look back at past months’ spending and track how the current month is going by comparison. You can also set budgets for each category and have the app track progress throughout the month.

To give yourself further encouragement you can set goals to challenge yourself to spend less and save more. Plus, you can earn in-app badges for engaging with the app.

Money and technology are the perfect combo. You can make money management a lot easier if you do most of it automatically and this is exactly what Moneyhub does. To find out more visit: https://www.moneyhub.com/