A guide to monthly budgeting

Budgeting – even the word itself sounds dull. Sadly though, budgeting is one of those things that could mean the difference between having a holiday or paying off debts, and being up to your eyeballs in bills you can’t pay (a situation which can be very scary). So here’s our simples guide to help keep those pounds in your pocket.

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Top tips for budgeting

First of all, you need to actually set aside some time to budget. You’ll also need to collect all those old credit card statements, wage slips and receipts. You know the ones - they’re probably lying forgotten at the back of a drawer…

When it comes to creating a budget planner, you’ll need to list all your income – all of it, whether that’s a monthly salary or extras you get from odd jobs. Include every source of income you have. Then, set out all your outgoings – this is where your receipts will come in handy. If your income and expenditure is inconsistent then take an average of the last few months.

Deduct your outgoings from your income and voila – you’ll have worked out your monthly surplus or shortfall! If you’ve ended up with a positive number – hooray, well done you. If you’ve ended up with a negative number – well, whoa there big spender, someone needs to cut back.

List your financial goals

Money makes the world go round. It’s not about being mega rich (but we wouldn’t say no), it’s about having enough to be able to do the things that make you happy, without having to worry about meeting next month’s rent.

It helps to list financial goals, whether that’s saving for a holiday of a lifetime, chipping away at a debt or making sure you have six months-worth of rent or mortgage payments in the bank. Having goals will help keep you focussed on why you’re budgeting in the first place.

money jar

But I can’t cut back on that, that, or that

No-one wants to be a scrooge – life’s for living after all – but if you’re sacrificing financial security for a few throwaway thrills, then even if it feels great in the short term, you’ll end up kicking yourself. Listing your outgoings lets you objectively see what’s a necessity (like rent, mortgage, debt repayment) and fripperies, like your daily coffee habit, eating out, or new additions to your wardrobe.

Don’t underestimate what even small cutbacks can achieve – ditching the daily takeaway coffee at £2.50 could add up to more than £600 a year and if you spend £5 buying your lunch every day, it could be costing you more than £1,200 a year. Turn the daily coffee and bought lunch into a weekly event – it’ll feel like a treat and be something to look forward to.

But like anything in life, if something’s too restrictive you’re going to eventually fling your arms in the air and say ‘it’s not worth it’ so the trick is to still make sure you’ve got some spends for fun stuff. As long as your financial necessities are being met, allow yourself a budget for enjoying yourself; it’ll mean you won’t pine for the good old days of reckless spending.

Try and keep a discretionary fund topped up for the odd birthday present you need to buy or for events like Christmas. If you’re trying to save money though, most people will understand not getting a Christmas card (which will only end up in recycling) or expensive gift.

Keeping to your budget – don’t overspend

The key is to continually monitor your spending against your budget – we know, yawn. But after a few weeks, it’ll become habit and you should start seeing the rewards. If you just can’t see any improvements, review where your money leak is – do you have multiple credit cards or loan repayments?

Taking out a credit card with free balance transfers and 0% interest might help you claw back some cash. Or think about a personal loan, you can take out enough to pay off all your debts and just have one repayment to make each month – which is much easier than juggling ten. With a loan, you can usually choose your repayment period and as long as you can meet the monthly instalments on time every month, it could give you some valuable breathing space.

Money, money, money

Don’t let debt or money worries eat away at you. Simple changes like swapping your current account for one that gives you a better overdraft facility or pays interest on your balance may be all you need to keep your finances under control. Or perhaps you’re a natural saver – in which case check you’re getting the best rates on your savings account or ISA But whether you’re a spender or a saver, at comparethemarket.com, we’re here to help give you options on your finances.

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