Budgeting may not feel overly exciting, but when you do it properly and couple it with good financial management, it can help make your life more enjoyable, with fewer money worries.
There are a number of ways you can approach budgeting, whether you use tech to help you or manually monitor your spending to help you understand what you need to do. But either way, budgeting means you can keep a better hold on your spending habits which gives you the freedom to improve your financial management.
So, here are seven ways to improve your budgeting and financial management:
1. Understand your income and outgoings
It may sound obvious but spending a bit of time checking through your bank statements will help you understand where your money is going.
You should put together two lists – one for money coming in, and one for money going out.
If you have more or almost the same going out as coming in, you may have little leeway to put money aside for a rainy day.
This exercise is the cornerstone of improving your financial management and it will offer you the information you need to get yourself into a better position.
2. See what spending you can cut
The surprising thing about going through your bank statements is that often you see money going out that you had forgotten about or that you never see the benefit from.
Things like unused gym memberships are a classic waste of money, along with subscriptions for magazines you never read, or expensive TV packages you could do without.
If you have any of these sucking money out of your account, be ruthless and ditch them.
3. Look at what you spend and where you could spend less
This is less straightforward, so you need to pay a bit more attention to how you spend your money.
For example, are you one of those people who will only ever buy well-known food brands? You know, the Heinz beans or the Hellmann’s mayonnaise? If so, you could save yourself a lot by changing this habit for some supermarket own brands.
Pick items like vinegar, porridge oats and vitamins among others to make savings without any change in quality, only price. There are more ideas about how you can save more money here.
Most online banking services now also show you a breakdown of what you spend where, which can really give you an insight into where your money is going.
4. Deal with any outstanding debts first
If you have debts, working to reduce those before you move money into savings is a sensible move.
Expensive debt, such as bank account overdrafts or store cards are the ones you should look to reduce first as doing this will save you the most in interest payments.
You can also look to move expensive debt onto a 0% balance transfer deal for, say, 12 months which will give you a break from paying interest for that period of time, allowing you to pay off more of the capital sooner.
However, if you have a lot of debt, then you may want to consider getting a loan to consolidate that debt at a much lower interest rate than you’re currently paying. You can use comparison services to find the best loans for you and also to check the likelihood of getting a loan without a footprint being left on your credit file.
Did you know Admiral Loans offers debt consolidation loans?
It’s important to note, although you may be able to get a loan at a lower interest rate, you may still pay more overall if the length of the term is longer. It’s important to compare the total amounts payable under each of your agreements.
5. Use tech to help you put money aside
It can be a lot easier to put money aside if you use technology to help you.
For example, there are a number of apps that will help you to round up payments you make in shops and online, including Plum and Moneybox, that put that money into a savings pot for you or into linked investment funds.
There are some pros and cons to these apps. For example, not all apps are covered up to £85,000 under the Financial Services Compensation Scheme.
Also, if you invest in a fund rather than having your money in a savings account, you may get back less than you put in. So be sure you know what you are getting before you sign up to one of these apps.
If you prefer to put money aside yourself, then move some money into a savings account on payday before you have a chance to spend it on other things. It makes a difference.
6. Set yourself a daily, weekly or monthly spending limit
No matter what you spend your money on, if you set yourself a limit on spending each day, week or month, it will help to focus your mind and avoid overspending.
Once you understand your income and outgoings, you can put a figure on what you can reasonably afford to spend over the period you choose.
One easy way to stick to your budget is to withdraw the set amount of cash from a cashpoint and only spend that without using credit or debit cards. That way you physically see what you’re spending, and you can literally see how much you have left to pay for the things you need.
7. Continue any lockdown savings habits you can
Yes, 2020 and the first part of 2021 have been very difficult for all of us as we have gone through numerous lockdowns and restrictions. But for some people there have been some financial benefits at least, such as reducing the amount we spend on eating out and commuting to and from work.
Those commuting in London and Oxford, for example, saved £1,804 between March 2020 and February 2021 according to research from Moneysupermarket – or £164 per month.
So, if your employer is happy for you to continue working from home, or will let you work from home a few days a week and you’re happy to do that, then you can save money on commuting.
However, even when you do go back to the office, you can continue to save money by being your own barista and making yourself a morning coffee to go, and by taking lunch with you so you don’t have to buy it each day.
There are many ways you can save money and make that money work harder for you, it just takes a little time and effort. But it will definitely be worth it in the long run.
I’m a highly experienced, multi-award winning finance journalist and broadcaster, having worked on The Daily Telegraph’s personal finance desk and in the City office for more than six years from 2000 to late 2006, becoming the deputy personal finance editor in 2004. I was the financial journalist behind the hit Channel 4 personal finance show Superscrimpers and my agency – Moneta Media – is a specialist communications agency, delivering content, SEO and PR for financial services and professional services businesses.