With pressure on families to work out where savings could be made, now is the ideal time to work out how best to budget. If you’re trying to come up with ways to plan your finances, read on for some tips that could prove useful.
Why is budgeting important?
You probably already budget for the month. This is important as it helps you keep track of your income and outgoings and gives you the chance to set aside money for the essentials.
However, with the rate of inflation predicted to hit 13% and a recession on the cards, knowing exactly how much you have to spend for the months ahead is crucial. Budgeting will help you to navigate these tougher economic times and on a personal level allow you to weigh up where savings can be made.
Review your finances
Begin your budgeting overhaul by reviewing your income and spending. Take the financial statements for you household from the last six months and set aside time to highlight how much money comes in each month and how much you spend.
Flag the essentials like monthly utility bills and food, then make a note of any spending on leisure that might be cut back on in the future. This exercise is essential for working out how you spend money as a family.
Reduce large expenses
If you need to make a large purchase, think about how you’ll approach this as it could significantly impact on how your budget looks. For instance, rather than spending a lump sum on a new car, spreading the costs over several months using a car loan can make it easier to plan your monthly outgoings. This is because you’ll know exactly how much to set aside each month for the repayments. However, always make sure that you are able to meet the monthly repayments and interest before taking out any loan agreements.
This works for other large payments too. Instead of paying out for expensive house repairs, could you spread the costs by focusing on certain areas that need work first?
Assess your outgoings
As well as the larger payments, look out for other outgoings. Are you spending lunch while in the office every day? Could you swap to preparing sandwiches at home?
When did you last check your monthly subscriptions? Could you do away with Prime or swap your Netflix subscription to a cheaper service?
Additionally, food is expensive right now. How much will you save by switching to a different supermarket?
Where possible, try to plan in your savings into your budget. Even if you set aside £50 a month, this can slowly build up and you will have finances in place to fall back on should you be hit with a major emergency that you have to pay for, such as a broken boiler or leaky roof.
Budgeting can go a long way towards helping you and your family. Set aside some time to really analyse your personal finances and work out your next steps from there.