In the current climate, budgeting has never been more important, particularly if you can add in another account called Contingency. Many people swear by this technique, lots of people swear at it too, but it truly works! If you’re spending more than £512, you cannot afford it, so you have to cut your cloth accordingly. So rather than spending £800 on a perceived £500 weekend break (£300 of which you cannot afford, but you tell yourself you’ll “manage somehow”), your Holidays account will categorically confirm to you that you have, say, £512 to spend. That way, when you look in your bank account it tells what you can truly spend that month. Those are examples, but use whatever is personal to you.Įach month when you get paid, you siphon the right amount of money into the Bills account, you put the right amount of money into the Holidays account, the right amount of money in the Christmas account, and so on. You have your ‘Christmas’ account and you have your ‘Big One-offs’ account. So, let’s say you have your ‘Standard Bills’ account, which is all the regular bills you need to pay each month you have your ‘Holidays’ account – you know you spend £1,000 a year on a holiday and that’s about £85 a month. It involves moving things into hypothetical ‘accounts’. Ultimately, the way I suggest people manage their money is by using a system I call ‘Piggybanking’. Of course, there are many other excellent planners out there, and I’d encourage people to use them.
#MONEY ON MYMIND FREE#
I have a tool called the ‘Budget Planner’ which is free to use on my website – it helps you balance the incomings and the outgoings, and factors in these big amounts, as well as the ones we tick off week by week. We need to break down those big amounts into a monthly cost, across the whole year, and add that to our monthly figures. The fact is, rarely are these costs factored into monthly spend, but they should be. They buy a new sofa every three or four years for maybe £1,000. But you know what, the average family in the UK spends £600 on Christmas, which is £50 a month. So, they’ll look at their food bills, their utilities, their mortgage, car lease and all those things, and that’s all good and well. The biggest problem that people have is they look across the month at what they typically pay for things. Sure, we all know what we earn, but we don’t know what we spend, and you cannot balance the see-sawing budget without being clear on both.īudgeting also leads us to make many assumptions.
The challenges that come about where budgeting is concerned is a 365-day thing, and the realities of managing our money are not aided by this simple fact – many people are appalling ‘budgeters’! In this month’s column, Martin Lewis looks at budgeting. He’s the UK’s leading money-saving expert a journalist and presenter who has kept millions of pounds in people’s pockets as well as lifting the lid on the threats and dangers we need to be aware of as consumers.
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