Creating a budget is great and all, but, as with most things, it can only be as good as the information you put in it. Most budgets don’t work hard for their owners and this is usually because their owners haven’t worked hard to create them.
Below, I whizz through a few considerations to be aware of when creating your budget.
Are you lying to yourself? Are you sure you spend just £10.00 a month on takeaway food? Is your clothes-buying line truly reflecting your ASOS addiction?
It is easy to add figures reflecting what we would like to think of ourselves. There is a balance to be struck between what you do and want you would like to do. If you have a costly habit that needs to be reined in, be gentle. Make the changes subtly or consider identifying a replacement for that guilty pleasure.
Capture all spend
Missing off the odd purchase you make can be harmful when you are trying to stick to a budget. You also increase the likelihood of damaged morale after realising you’ve failed to stick to your targets. If you like to treat the kids to the cinema or pizza night a few times a month, add this into the budget!
Allocate your underspend
If, after creating your budget, you notice you have some cash left over, first: congratulations! But do not stop there. This cash can be used for good. Increase your savings contribution or start investing. Your budget is the starting point for increasing your net worth by building your assets. Identify the best savings or current account to deposit your cash into. Alternatively, check out the many investment platforms available.
Ongoing improvement requires you to regularly review where your money went. How did you do last month? Did you manage to stick to your various spend limits for each category? Were some budgeted amounts completely off target? Take time weekly or monthly to cross check how you are doing and make the necessary tweaks to keep it realistic and achievable.
If you are ready to create your budget, check out our guide here.