I get a few e mails each week asking me how I manage our monthly budget and if I have any tips to help others to manage theirs so this week, I’m going to share a few of my tips for calculating your monthly budget, reducing your outgoings and how to make sure all your bills are paid on time.
Most of these tips may seem like common sense but I thought it might help you to know what I do….
Work out what your monthly budget is
First of all, I sit down every few months and calculate my monthly budget. After this month’s review,I know that I should have around an extra £500 a month after paying off all essential bills, petrol and food shopping. It rarely (actually never) works out that way though when you take into account our fun budget, the ad-hoc stuff and the fact that I’m starting to buy bits and bobs for Christmas.
It’s a really good idea for you to spend an hour or so at least every three months working out what your monthly budget actually is – if you don’t know how much surplus you have (or don’t have) then you have very little chance of sticking to your budget. I gather all my paper work (gas, electricity, water, phone everything) and my most recent bank statement together before I start and make sure that the kids are occupied so I can concentrate.
I set it out like this and add in extra sections where necessary.
To get the amounts for food shopping and petrol, use your bank statement and look at the amounts you spent on these things in the last month – use that figure for your budget. This works if you pay by debit card for most things but might be a bit more complicated if you use cash and you may need to keep all receipts for a month so you can work it out that way.
Include absolutely everything that you pay out each month – be honest otherwise you won’t know where you need to cut back. If you buy a coffee at work everyday for £1.50, work out how much that costs each month and add that in there too.
Cut costs where you can
When you’ve worked out what your monthly budget actually looks like, you can see where you can cut back.
If there’s any Direct Debits for things you don’t need – cancel them! Any subscriptions for services you don’t use – cancel them! Write to or call the company concerned and also let your bank know you’re cancelling so they don’t pay any more charges (make sure your agreement lets you cancel first though).
See if you can get a cheaper deal with your gas and electricity – if you’re not already with the same company you can usually get a discount if you have both with the same company. Go through a cashback website like Quidco (I’ve explained how to use these sites previously here) and switch to companies that will save you money each month and get cashback in the process.
Look at things like your mobile phone contract, your TV, phone and internet packages and see if you can renogotiate better deals with your providers. Companies like Sky often have great offers that they can offer you if you tell them that you’re going to cancel your service and swap to a competitor. To start saving on your internet packages, ensure that you are making the most of your broadband deal. If you rarely use the internet, it may even be worth getting a pay as you go dongle, where you you use the internet and pay whenever you please, which may save you cash overall.
If you have credit card debt, can you repay it in a more efficient way? I wrote a while ago about snowballing which is a way of repaying debt quicker by looking at the order you repay your debts. You can also consider balance transfers to transfer your balances to cards with lower interest rates ans special deals.
Save money on your energy bills, cut food bills by meal planning and reduce your spending on petrol. You should be able to see some savings quite quickly and you can tweak your budget in the next couple of weeks to take these savings into account.
Pay by Direct Debit
Make sure you have everything that you can set up to be paid by Direct Debit – as many as possible on the same day of every month, preferably for the day after your pay day. This means that you know all bills will be paid on that date and you won’t get any bank charges for unpaid Direct Debits.
Deal with what’s left
There’s lots of ways to sort out the money that’s left in your account after your bills have all been paid – some people use separate bank accounts, some get the money out and allocate it to envelopes (I love the one’s that Jen wrote about on A Thrifty Mum)
Remember, your budget is a work in progress
You need to revisit your budget every few months as things can change quite quickly. Make sure you check your bank statement each month to make sure you haven’t started overspending in a particular area and that you know about everything going out of your account.