With the government reigning in spending and increasing taxes which reduces our free cash, we certainly are feeling the pinch. I’m now working part-time following the birth of our daughter, plus I’m a public sector worker so I’ll be having a pay freeze for the next two years. Our outgoings have also increased as Holly arrived. So this is what we did about it;
Firstly and most importantly we talked. We discussed what was worrying us, and what we wanted our finances to look like. This took about an hour, with all of our financial information in front of us. Then we came up with a plan.
Next was to create a budget; look at what we have coming in and what we have going out – actually seeing where your money goes (and how much things cost) really makes you think about what you’re spending. We thought about groceries, petrol / travel to work for budgeted costs that need to be accounted for, but also meals out and family days out. This then helped us assess our free cash and what we could save (or use to pay off debts as the case might be).
Monthly budget talks; this gives us an opportunity at the end of each month to plan and see what is happening in the coming month eg, birthdays, other special occasions and agree on what we’re going to spend. Is there an irregular cost e.g. MOT, car tax, new pair of shoes, new coat etc.? Will something need replacing that can’t be repaired or isn’t worth being repaired? Then budget for it. We also ask the question can it wait any longer?
Keep track; We keep receipts so we know what money has been spent on and keep a check against the budget. The more you watch it, the more keenly you will try to stick to it.
Goals. We’ve set ourselves goals and when we meet them we will reward ourselves. It is not going to be easy always sticking to our plan so we want to incentivize ourselves to meet our goals. This could be a little black dress and a night out, or a holiday – you decide! Don’t make it, I’ve stuck to the budget this month so I can go wild next month (unless its budgeted for of course ;0)
The final thing we’ve done is cut back. We’ve looked hard at where our money is going and decided where we can make savings. Can you bulk buy – spend a bit more in one month but it goes further. Ask yourself the question, do you really need a new bag each month or is it just that you want one? We’ve found that when you’re striving for a healthy bank balance, needs and wants have to be seriously justified. We’ve cancelled Sky. A big move for us but, we couldn’t honestly say we got value for money for the use we got out of it. We had the full works too (not 3D!) so this was a big thing for us, but it will save us over £850 in one year. When you see those monthly DD’s as a lump sum, then things can seem quite expensive quite easily. Yes we might buy a few extra DVD’s but we’ll still be in pocket. How many people have a gym membership that they don’t use (or could probably just run from home instead)? Look at your outgoings and think, over a year, is it worth it?
Help! Sometimes it’s hard to stick to budgets, particularly for shopping where you have multiple transactions in a month and so it can be hard to know where you are all the time. Answer – cash. We draw out our grocery budget in cash at the start of the month and pay for all groceries in cash. This also gives you a visual stimulus as to how much is left and I believe you are more aware of what you spend when you physically hand it over, compared to tapping in 4 digits on a key pad. This has also encouraged us to shop around for groceries, plan better and waste less. You might consider not doing your weekly shop at a premium supermarket or to even look locally for fresh fruit and vegetables. We buy much of our fresh produce from our local market and find that the quality and price are outstanding. However, don’t get caught out by a false economy at the supermarket. If the offer says “asparagus £1.50 each or 2 for £2.00” don’t buy two if you know that you’ll end up throwing one away, otherwise you’ve just spent an extra 50p!
Another trick is move money around different bank accounts. Say you want to budget for clothes shopping but only actually shop for them every three months. It’s better to set money aside on a monthly basis rather than your bank account taking a big hit the month you decide to go clothes shopping. The concept of budgeting, should help avoid the use of credit cards which are the most expensive ways of borrowing money.
By using this approach, we are getting the most out of our money. We have a healthy savings plan, and we don’t have to worry about our finances. By following the above points, the money takes care of itself. This isn’t about cutting everything out of your life. It’s very important to treat yourself and have fun. However, this is so much easier when you can spend money, without the worry that you might be overspending.