One of the things I want to talk about on this blog is how to save money, how to budget your money and where you can cut costs etc… I feel like there is a lot of chat about how people can’t afford to buy a house because the cost of living is so high, and if you’re renting, how do you ever afford to buy if you are spending all your money on rent etc. etc. Which I don’t disagree with, but I don’t think there is much out there about how to actually budget for your life and save money. I use a budget that I have designed myself which works out how much you can afford to save and shows you a forecast of how much you can save in the coming months. It also shows you how changes in your spending affect how much you can save. You will do much better at saving if you put away what you can afford each month (which differs) rather than trying to save a fixed amount!
I have a budget, it is an excel spreadsheet and I budget my whole life… Before I started saving for a deposit for a house I didn’t worry about budgeting or saving, my money just seemed to disappear every month and the week before pay day was pretty tragic… Then I realised that if I wanted to save money, I would have to put the money in my separate savings account before I spent it. Otherwise it would be gone… so here is a blog post about my budget and how you can set one up too and start saving!!
First things first
There are a few things you need to do to start with to get organised for creating your budget.
- Open up separate bank accounts – there’s nothing stopping you having a couple of bank accounts and if you’re like me- if the money isn’t there you can’t spend it- then you need to separate it out. So, you need a current account and a savings account, I also have a joint account with my partner for all our household bills and mortgage etc… (blog on this to come)- so I separate my money in 3 ways, current- what I can spend, savings- money I don’t spend (try not to spend), and house money which I put in to a joint account – more money I don’t spend…
- Have a look at your expenses and where you spend your money. Don’t worry about the costs of things as yet- we’ll look at that in another blog, but just have a look at actually how much money you spend each week and on what. Looking through your bank account can also show you where you can save money. One of the things I found with looking through my accounts was where I could save small bits of money- not buying snacks and magazines when I bought fuel, only purchasing a new shampoo when the one I was using was nearly gone rather than buying a new shampoo every time I saw a fancy one in the supermarket etc.- another blog to come on ways to save money… I calculated that give or take I spend £120 per week on stuff that isn’t a fixed cost in my budget, i.e. fuel, lunch at work, make up, clothes and going out. If I’m tight or want to save more, I will cut out the clothes and going out and live on £90 per week etc…
- Make a list of your outgoings that are every month and look at annual costs which you have every year, i.e. car insurance. Sometimes it’s easier to pay things like this by direct debit, you do pay slightly more than a lump sum but it’s much easier for budgeting to have a fixed monthly outgoing if you are really struggling to keep on top of your finances
Getting to the budget
This is what a template of my monthly budget looks like. This is just showing the headings and how it all works out- I’ll put some figures in now and I can show you how this works. There are also formulas in the boxes so that it all calculates the budget at the end so you can see the savings etc…
Ok, so let’s work through this… disclaimer- I have just put figures in here to demonstrate how the spreadsheet works- this does not reflect my own money or finances
Wages month – this is the month that you worked and it is going to be paid at the end of the month to finance the actual month
Actual month – the month that is being funded by the wages month
Weeks per month – this is important as the weekly cash is a fixed sum multiplied by the weeks in the month. When I am using this during the month I can delete these as I go through the month (see later in this blog post).
Income / Balance – this is what you are going to receive that month. I use the balance for the month I am in and work through the month using this, so if we were in July, D4 would be = D10 and then I could see how much money was left – see later in this blog post for details
Outgoings – self-explanatory and corresponds with the ‘notes’ for a one off payments
Weekly cash – I personally budget about £120 per week – this will cover going out, lunch at work and fuel.
House costs – this comes out of a separate house / joint account budget (that I will talk about in another blog) so this is how much is being paid towards the house bills etc… You can include all these direct debits in to the main outgoings section if you only run one current account.
Savings – this is on a formula that adds up all the outgoings and takes them from the income, thus giving you what you can afford to save that month. This is what I really like about this budget- you’re not trying to say ‘I am going to save £500 per month’ it shows you what you can afford to save and by amending what you’re spending in other areas you can see how much you can be saving. It also allows you to dip in to your savings if you have a big spend coming up but you can’t afford it out of that wages month.
Savings total – this is the addition of the column; each cell adds up what has already been saved (cell above) to what could be saved (cell to the left) for example, cell L5 = L4+K5
How to use the budget
- Fill all your sections in and see what you can afford to save
- As soon as you get paid make your transfers, i.e. savings in to your separate savings account, house money to joint account etc…
- Update the month you’re in and keep checking your budget each week, I like to update my budget on a Monday or a Friday!
- Look at how you can reduce your spending on certain areas (I’m going to do another post on this… There are a lot of posts coming!)
So here is an example of the budget working in a part month… I have just added in June, for the month we are in and this is based on 19th June, so we have 2 weeks left of this month, w/c 19th and w/c26th.
I’ve got my current bank balance in D11. D3 = D11. I have these separate as if there is any income or expense that hasn’t made it through to my bank balance I manipulate it in D3. For example, I returned a top and I am waiting for £23 to come back to my account, D11 will show £300 and D3 will show £323. In this scenario, we can see that I’ve already transferred the amount I could save to my savings account and the house money to the joint account. The direct debits for the phone bill has gone out but the car insurance has not. If you’re super organised you can also add in the date of the direct debit (the day only) in to the description bar of the heading. As these monies go out of your account you delete them (or put them to 0 so that the formulas still work) so that the balance and savings etc. remains accurate. You can see £240 showing in Weekly cash which is the two weeks in the month x £120. In the savings column, there is an unaccounted £20. This is because at some point so far in this month I spent under budget so this £20 is accounted for. You can either spend this or add it to your savings!! Brucey!
How reducing costs can save you money…
This is obvious, but I think the budget shows you really well how cutting costs can show how much you can save over time…
Budget as previously…
This shows savings by January 2018 of £905. Amended budget…
By reducing weekly spends to £100 and reducing your phone bill to £25 per month you can save £1,595- that’s an extra £690 by making some small money savings changes…
I hope this has been of interest, coming up in budgeting and saving will be…
- Household budget (I have now written this)
- Budgeting food
- Tips on how to save money & make additional income
- Help with buying a house
If you’d like to see anything else or if you would like to be able to download a spreadsheet already formulated then I can attempt this if there is demand… I’m still working on my computer skills…
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