Monthly budgets are one of those things that should be done and will help to save you money. If you are like me creating a budget is a bit like eating vegetables, you know it has to be done and is good for you but you keep putting it off. I have a vague idea of what goes in and out each month but I do not have a formal budget which allows me to keep check of things. Recently I realised this has to stop, I really need to keep track of my money. This way I will be able to put a bit aside for things I want and ensure I am not in debt which is spiralling out of control. By looking at what I am spending I may also find ways I can save money resulting in more disposable income. This can only be a good thing.
If you are in debt the only way to get out of it is to create a budget. Small regular payments to decrease the debt will make you feel more in control of your money and give you peace of mind. Ignoring debt will only lead to problems in the long term so sort it out before it becomes an issue.
When Now Pensions challenged me to tell you about how I budget and to answer some questions around the whole subject of money and pensions I decided to take the bull by the horns and get started.
First the questions:
Has the recession made you more money conscious?
I have noticed that things are costing a lot more than they used to, petrol for example has really shot up in price. Unfortunately my income is not increasing at the same rate so I am definitely trying to be more careful. I also feel that there is not as much job security as there used to be and it would be a lot harder to find a new job. I would not have the savings to fall back on if the worst happened and really feel that I should be making more of an effort to put money away for a rainy day instead of living hand to mouth. The answer to this question is yes and I am going to make an effort to do something about keeping better track of my money.
When budgeting, do you factor in saving for the future?
I try and put a little bit aside each month to save for the future. In practice recently this has been eaten up by problems with the car and other emergencies but I was glad that money was there to fall back on. I really should be making an effort to put more away for the future. I do have a pension but I am not sure that it will be enough to live on when I retire and I do not want to be living on the breadline.
I do drop all my £2 coins into my piggy bank though and save them up till Christmas.
Do you think there’s enough education around pensions, and the upcoming auto-enrolment scheme?
My first thought on reading this question was what auto-enrolment scheme, which definitely implies there is not enough education around it. Having read a little bit about it I found out it is a scheme where if you do not have a pension and you meet certain criteria, your workplace automatically enrols in a pension scheme. It strikes me as a good idea, a lot of people do not get round to getting a pension. When it comes to pensions I am completely in the dark. I know I have one and I pay into it, but I would love to understand more about how it works. I think a lot of people are in the same boat, they know they have a pension but do not really know what it is worth. There should definitely be more education about how they work.
So having answered the questions and put off doing my budget once again I felt it was time to look at how to do that.
Where to start your budget.
Often people are put off budgeting because they are not sure where to start. The best thing to do is to gather together as many bank statements as you can and use that as a starting point. Then you need to do the following:
- Write down all the sources of income you have each month. This may be your salary but you may have other sources of income like child benefit. Record this total under income. A spreadsheet is useful at this point but a notebook will work just as well.
- Write down all the outgoings. You may have regular direct debit payments so make a list of these. It should include mortgage, rent, gas and electricity, water and all the other things you need to pay.
- Think about bills that you only need to pay once every six months or yearly like car tax and work out a monthly amount to cover this and include it on your budget. Put this money into a separate account so it is available when you need it.
- Next think about essentials like food, petrol, travel costs, clothing and also an amount of emergencies and put aside some money for these.
- Total out the income and outgoings and see how much money is left.
- If you are in debt write a list of all the debts you have and out of the money left set aside an amount to pay off the debt each month.
- If you can put a regular amount into a savings account as well.
At this point you should feel much happier that you know where your money is going. This is only the start though, you should keep a notebook and keep track of what you are spending on every day. It is so easy to waste money without realising. Next month you can revisit the budget and work out where you can save more.
I have made a concious effort to get started on my budget and hopefully it will make it easier to track my money, I hope you are going to make a start as well. Do you budget and do you find it works well for you? I would love to know.
Disclosure: This is a sponsored post but I was not told what to write and my opinions are my own.
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