Living on a Shoestring - Making a Budget

This week's post is all about making a budget or spending plan. Some people are put off doing this because they think it is too much work or they don't need one because there is always money left in the bank account. We lived like this for years and finally realised that although it was quite a bit of work to set one up but it certainly gives you more control over your money.

The first thing we did was work out how much money we had coming in regularly. We did not count on intermittent income, just the basic we could depend on every month. This included child benefit but some people keep this separate just for the children. Once you have that figure then track ALL your spending for a month. Give everyone in the house a little notebook or use an electronic one and RECORD ALL YOUR SPENDING ! I cannot emphasise enough how important this is. It is the only way to get an accurate idea about what you are spending in each category. After starting that, use statements and receipts from throughout the year to work out how much you spend on annual events, for instance birthdays and going on holiday. When we first did this I was horrified how much I was spending some months on books. I justified it by saying that I needed them for work, but there were cheaper ways of getting them, like the library !

We still track spending every month and I adjust the budget every 3 months to reflect our actual spend rather than the theoretical one I planned at the beginning of the year. We use the following categories in the budget:-

FOOD
PETROL
RATES
GAS AND ELECTRIC
WATER
TV
HOUSE INS
CAR INS +tax
CAR BREAKDOWN
CHARITY
SAVINGS
POST OFFICE
HOLIDAYS
LIFE INS
MEDICAL
DENTAL
GIFTS
HOUSEHOLD
MISCELLANEOUS
ACTIVITIES
BOOKS
ENTERTAINMENT
CAR REPAIRS AND SERVICE
CLOTHES
TRANSPORT
POCKET MONEY
EXTRA CURRIC
SCHOOL FEES
TRAVEL INS
TEL+INTERNET
SEPTIC
GARDEN
HAIRCUTS
WOOD
BOILER INS
UNION
TRAINING

 As you can see this is a lot of categories and some people manage with fewer. However, we tried this and were always coming up short wondering where the last £100 had gone. Now, I have a figure in mind for each category and can save up over the year for annual expenses like the TV license. It is almost always cheaper to pay all at once than to pay in instalments. We used to pay the car tax,TV license and the house insurance all on instalments as I thought this was better budgeting as it meant a fixed amount through the year. Only when I worked out how much extra it was costing us did I realise that it was worth trying to save up through the year. The first year we tried it I managed to pay the TV license all in one go, then we worked on the car tax etc. It has taken us about 7 years to get to where we are now and I used to do it the budget on paper using an A4 notebook. I only set up an EXCEL spreadsheet 2 years ago.

The Moneysavingexpert website has some excellent advice and templates on setting up a budget and they make a good place to start. You can always tweak it to suit you later on ! Good luck with budgeting !