Finance Fixer: Essential Guide to the Art of Budgeting

In light of recent economic ‘hiccups,’ it’s not surprising that we’re all feeling the strain at the minute. It would be easy to bat around figures and statistics about the rate of inflation rising faster than the rate of pay and so on and so forth; at the end of the day, the only important figure is what’s left in your bank account as you draw towards the end of the month.

Of course…that figure is always a little bit smaller than expected, and that means that the last few days of the month are often a squeeze. It can be really difficult to get on top of your finances and make positive changes, but budgeting is a great way to at least make a start.

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Step 1: Don’t Change A Thing!

That’s right, the first step is possibly the easiest first step of any guide that you have yet to, or are likely to, encounter. You don’t have to do a thing! Go about your daily life as you would and buy everything that you would usually buy.

The only catch is that you have to write everything down. Everything means everything; every single penny that you spend should be written down one place; even the money that you spend to buy the notebook and pen!

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Step 2: Create a List

Once you’ve got a nice little (or big!) account of every penny that you’ve spent, you need to create a list and group your expenditures into categories.

For example, any money spent on electricity bills, gas bills and water bills can all be grouped under ‘Utilities,’ and any food or drink you’ve bought can, unsurprisingly, be grouped under ‘Food’.

By grouping your expenditures into broad categories you’ll be left with a good representation of exactly where all of your money is being spent.

Step 3: Compare and Identify

Add up all of your expenditures for the month and compare the total figure with your income. What’s the difference? If you’re spending more than you’re earning then something needs to change and quickly!

Identify individual categories in which you could cut down spending; categories such as food shopping are areas in which families are prone to overspending!
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Give yourself a budget to stick to within each category for the following month; ensure that the total of these budgets amount to less than your income.

Step 4: Make Positive Changes

As you begin a new month, put in place your plans to cut spending in your chosen categories. If you’re overspending on food shopping then you might try shopping in a cheaper supermarket or maybe you’re starting to plan your meals before you get to the supermarket.

There is no shortage of money saving tips and tricks online so do your research; you’re bound to find a saving tip that works perfectly for your family.

The most important part about this step is to make these changes realistic and sustainable; don’t pretend that you’re going to live off of value noodles for the rest of your life! Make real and manageable changes that will be sticking around for the long run.

REMEMBER: you still need to write down everything you spend! It’s a great habit to get into and you’ll need it for the next step.

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Step 5: Start from the Beginning!

Now that you’ve got yourself a second list of expenditures for the month, it’s time to start the entire process again. Categorise in exactly the same way as you did last month, compare, identify and change.

By understanding exactly how much you’re spending and seeing clearly where you’re overspending on your budget, you’ll find that it’s much easier to cut back where necessary and make your pay packet last the month. Repeat this process every month and you’ll be a budgeting expert before you know it!

This sponsored article was written by Jennifer Griffiths on behalf of Pounds to Pocket. No matter how effective your budgeting is, an unexpected emergency expenditure can leave the best of us out of pocket; applying for a personal loan could be the ideal solution.

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