‘A budget, why would I need one? I earn enough money, I only have a bit on a credit card and other than my car and mortgage I don’t have any other ‘big’ loans’ Sound like someone you know?
We were like just this before a few years ago. After listening to Dave Ramsey’s show and finding success stories it made me think, do I need a credit card? Car loan? If an emergency was to happen what would I do? We may have been earning enough to live pay cheque to pay cheque but I wanted more. If I was to look at our 20-year-old selves just married I would have given myself the gift of a budget.
I will admit the first few months can take a little time to get your budget written down and to get the numbers that work for you (and your family). But I promise it is well worth it.
So where to begin….
Look at the last 3 months of spending, look everywhere, your bank accounts (all of them if you have multiple) and your credit cards. You want to look at 3 months at least as you want an average, you may look at last month and only spent £10 on clothes but the two months before the average was £100 so ensure you get a true reflection.
Write down what you are currently spending. You may want your food budget to be £300 but if it is currently £600 write down £600. You can work on reducing it but you are just starting your budget so for right now you don’t want to come up short.
When you are done, what are you left with (Pay cheque minus spending)? Have you realised you have an extra £200 that you didn’t know you had? Amazing! Work out where you want it to go. Savings is a great start, build an emergency fund to ensure you no longer need your credit card (Dave Ramsey’s seven steps are here if you want to see how we started) Or have you just found out you spend more than you earn? This maybe why you are reaching for the credit card or using your overdraft? What can you cut? Do you need the full TV package? Do you need to eat out every week? If there is nothing you can cut then can you make some extra money? A second job or selling somethings that have been sat in the garage for years? Either way something needs to change to help you get out of the credit card/debt cycle.
So now what….
A few little tips that have helped us over the last couple of years:
- Use cash where possible. Handing over the money is a harder transaction than swiping a card. If you have a £100 clothes budget and the jumper you just picked up cost £60 but you know there is school uniform still to buy you will think twice.
- Check in regularly. Review your budget this can either be small little weekly checks to ensure your on track or larger monthly checks where you review your budget what is working and what needs to change. If you are with a partner I would suggest you do this together where possible as it really helps to be on the same page.
- Have financial goals. What you want in a year, 5 years and 10 years? This is a great starting place for you to see what you want financially and for you to work out what it will take to get there.
This may feel like a chore to start with but you will see results so every minute you put in to this is well worth it.