Our topic for today is basic budgeting. I’ll preface it by saying that my husband and I are (thankfully) not struggling financially. Having said that, we’re not exactly minted either (so no need to send threatening letters or requests for donations). With that in mind, I hope everyone can benefit from what works for me.
My husband tends to be a bit of a spendthrift so we’ll just go right ahead and ignore him. I, on the other hand, am much more frugally minded and can be a bit of a scrimper and saver, even when times aren’t tight. I save money where I can, I use coupons on a regular basis, and I try to find different ways to cut our bills. I’m definitely a reduce-reuse-recycle kinda gal. I guess it was my upbringing. Anyway, seeing as we have separate bank accounts, it’s a lot easier for me to control my money and avoid having constant heart attacks at the amount my husband’s spending.
Here’s what I do:
So let’s just cut all the bullshit and dive right in. I have a budget sheet in my planner (surprise surprise) and, at the beginning of every month, I sit down and list out my income for that month and all my expenses.
Income includes rent and bill money from my tenants, wages I get from working part-time in the local pharmacy, and child benefit. (I don’t include any money from my legal practice because it’s irregular and unpredictable. If a cheque arrives, it’s a bonus.)
Expenses include utility bills, mortgage payment, credit card payment (I pay in full every month), insurance, mobile phone bill and any random expenses (based on a “best guess” estimate) like gifts, holiday spending, etc.
I don’t use anything fancy, just a basic credit and debit sheet that I designed myself, so don’t feel you have to have a degree in accounting or anything. If you’ve got a pen and paper, you’re pretty much all set. This is how mine looks (before I fill it in):
How I use my budgeting sheet:
It’s pretty simple. I fill it in every month on the 6th. Why? Because that’s the day my credit card statement arrives so that’s when I have all the information I’ll need. Most of my bills come out at the end of the month or on the 1st, so it also gives me about 3 weeks’ breathing space before I know my next bill is due.
By filling in all the figures for things that have to be paid, and subtracting expenses from income, I’m left with a ballpark figure of how much I’ll have left at the end of the month (if anything). If I’ve a lot of wiggle room, I pretty much forget about it until the end of the month when I just have a quick look to make sure I’m still on track before the bills come out. If it’s looking fairly tight, or is in the red, I monitor everything pretty closely to ensure that, should I need to, I can borrow money from our joint savings account to cover the cost (and return it as soon as the next income payment comes in).
If your situation is a little more dire than mine, you may need to keep a closer eye on where your money is going, but I’d still highly recommend writing everything down. Sometimes seeing it in black and white is the kick up the arse you need. You can see at a glance where you’re haemorrhaging money and where all your hard-earned dough (if any) is going.
What else I do (and why):
If my forecasted budget tells me I’ll have enough income that month to cover my outgoings, the first thing I do is clear my account completely by transferring everything to my mortgage account. This is an extra payment, on top of my regular monthly payment, and means I can start with a zero-balance fresh slate each month.
(I’m focusing a lot of energy on paying off my mortgage as quickly as possible. There are still 30 years left on it so I’m under no illusion that it’s going to be cleared in the next few months or anything, but I’m steadily chipping away at it.)
To “sum” up:
I know this is budgeting in its most basic form, but I intend to develop it further in future posts. For now, just know that you should be making a list of your income and expenses every month to get an idea of what your current financial situation is like and where all your money is going. It’s harder to find solutions if you don’t know the problems. Sometimes people don’t know that they’re actually spending more than they’re earning until they see it in front of their eyes, so don’t think this is wasted exercise just because you don’t have the bailiffs banging down your door.
So if you want to get a handle on your finances, get writing!
I plan to do a whole series on budgeting so, if there’s any particular area you’d like me to cover (keeping in my mind that I’m not a financial expert and can only give you the benefit of my own experience), let me know in the comments. I’d love to hear your suggestions!
I’m also thinking of listing my budgeting sheets on Etsy as a digital download (for a nominal amount), so please let me know if that’s something you’d be interested in.
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