6th October 2020

Have you ever looked at your bank account at the end of the month and wondered where your money went?  Your balance is less than you thought it should be and you can’t exactly pinpoint the deficit without going through a pile of receipts?

Have you ever thought to budget?

I know, the word ‘budget’ is boring and thinking of the task itself makes you want to go and sort out your sock drawer instead, but knowing where your money is going is taking back control. Look at it this way – when you budget you know exactly where your money is going and you’re essentially giving your money a job!

A simple definition for budgeting is: ‘providing (a sum of money) for a particular purpose’ – GIVE YOUR MONEY A JOB!

Start the month by looking forward to what is coming up in the next few weeks, and making sure you’re prepared by having the money in the right places to meet those needs. It’s about being intentional with your money. Plan!

Add up your total net income (the amount you receive after tax etc.) that’s paid into your account, each week or each month. If it fluctuates due to overtime or shift patterns, work out an average. Add up your regular monthly bills – those that are on direct debit like your rent or mortgage payment, utility bills and/or loan repayments.

Take the outgoings figure away from the income figure and you’re left with your discretionary income. With this money you need to pay yourself first. That means either:

  • Reduce debt such as credit cards, OR
  • Save towards your future.

If you have some debt to clear, this is definitely a priority, but for others the priority is setting up an emergency fund.

So, whether you are setting up your emergency fund, paying off debt or saving for the future, you’re going to be in control of how much of your discretionary income to put aside. Once you have paid yourself first then you can plan how to spend the rest of the money. Don’t forget, you’re going to have to eat, put fuel in the car, and maybe buy some birthday presents, so don’t leave yourself short.

You can also plan for annual events, like Christmas, by putting aside a little each month so that you don’t have to pay for everything in December when Christmas finally comes around.

You should plan how you will spend every pound that comes in. Don’t leave too much of a buffer in the budget, or you’ll find it will get squandered. It would be better to put that money towards paying your credit card or bulking up your savings pot!