My motto this year seems to have been ‘Spend Less, Save More’. On the whole I’ve stuck to it pretty well. Since there is a brand, spanking New Year just around the corner I thought it might be a good time to do a little series on this very theme. I’m doing this because, what with all of the pregnany, job changing and Christmas madness I feel like I need to refocus so that I stay on track.
Many of the things in my ‘Spend Less, Save More’ Top Ten will be a re-hash of things I’ve already talked about but it seems like a good idea to have all of my ideas down in one place so I know what I’m trying to do. I tend to think that everyone is so different that there can be no ‘one size fits all’ approach to anything. However, if anyone finds any of it useful too then so much the better!
‘Spend Less, Save More’ Part 1: Setting a monthly budget
I know it seems boring and and obvious and I also know that it is something every finance book and blog talks about, but setting a budget and sticking to it is the only way I know of keeping out of debt and trying to save.
When I’m working out my budget I sit down with my diary, a calculator and my trusty filofax and plan the following:
- Basic expenses: For me this includes my contribution to the joint account which has direct debits set up for all of our regular bills from the mortgage to the water bill. This is the same every month and is at the top of my list.
- Food: I’ll be posting on this subject later in the series but surfice it to say that I set a budget for the month depending on whether my wages need to stretch for 4 or 5 weeks.
- Fuel: I slightly over budget for this every month in case we end up going on a few unplanned trips (we usually do!).
- Spending money: I give myself £30 a week spending money for going out and bits and bobs.
- Contingency: I usually put back a small contingency fund of around £40 a month. This comes in handy if we get invited out somewhere or if a small, unexpected bill appears.
- Checking my diary: I always look at the month ahead to see if there are any birthdays, haircuts, planned outings and so on. There is always something going on and I find it best to budget for these things in advance to make sure I actually have the funds in place!
- Savings: I decide how much to put back straight-away (based on my other expenses for the month) and what I am going to be putting these savings towards. During 2009 I have had savings funds for Christmas, holidays, starting a family and emergencies. The savings funds will be different in 2010, but I find I am more motivated when I am saving towards something specific.
My food and spending budgets are set on a weekly basis and I usually take out cash for both. Each fund has its own purse. I like paying for these things in cash as I find it a good reminder of how much I have left. If I over spend one week then I cut back the next to make sure it lasts. At the end of the month, if there is anything left from my food, spending, fuel or contingency funds then I either add it to my savings or put it aside for a treat.
Once a week I do my online banking, check off all of my receipts and make any adjustments needed. I also use this time to update my budget for each thing so I know how much I have left to spend on food etc. From time to time I keep a spending journal and record exactly what I’ve spent down to the last penny. I only really do this if I notice I’ve been buying unncessesary odds and ends and it gets me back on track! I know a lot of people in blogland who do this is in one or another and it really is a good way to learn where money is being wasted.
I’m not on a small income and I don’t have to keep such a watchful eye on my finances. What I will say is that, by doing so, I have paid off any outstanding debt and saved more than I ever have. I also spend a lot less time dealing with clutter because I don’t buy things I don’t need or want. 2009 has been the first year of my adult life I’ve had real financial peace of mind. I didn’t panic over the change in jobs (and the dramatic cut in wages or the loss of my company car) because I knew that a) I was already living on a lot less than my income and b) I had some funds to back me up during the transition. A couple of years ago it occured to me that if I ever changed jobs I wouldn’t necessarily be going to a job that offered a company car. I decided to tuck some money away in an ISA and, ever since, I have pretended it doesn’t exist. If I’ve needed money for other things I have either saved up more or gone without. I was adamant, in my own mind, that the money was only ever for if I needed to buy a car and so it has never been touched. It isn’t a huge amount of money, and I’m going to have to use most of my emergency fund to get something halfway decent, but I’m so glad there is something there at all.
Don’t get me wrong – I’m not saying that money is the be all and end all because it isn’t. What I will say is that most of us have to go out and earn money to live so we might as well make the most of what we take home at the end of the month. I enjoy working in my industry, I’ve been doing it for years and I’ve got no intention of doing anything else. However, I wouldn’t do it for fun. I do it to earn a living – pure and simple. If I’m giving up my free time I’m not going to waste the wages I get in return! Earning a wage means I can pay my living expenses, have a few nice things from time to time, go out, go on holiday and also prepare for the future and the unexpected. If I don’t set a budget and then keep an eye on my spending it all seems to go out of the window.
2010 is going to be challenging financially – less money, new baby and maternity leave to mention just a few things – so I’ve really got to make sure I keep on top of my planning!