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Advice

How to Create a Budget Planner

Have you decided that it’s time to take control over your finances once and for all? Millions of Brits do so every year and it’s always for a wide variety of reasons.

It could be that:

  • someone in the family has lost their job and you need to know what’s coming in and what’s going out more than ever
  • you have decided that you want to make a big purchase (a new home, a new car) and you need to know whether you can afford it
  • there have been two or three items of unexpected and large expenditure of the last few months that have left the cupboard a little bare and you want to find out why that is.

Whatever reason you’re choosing to do this right now, it’s a hugely positive step. To have a life where you can enjoy yourself, set aside money for a rainy day, have a “fun” fund and know that, when your head hits the pillow at night, the last thing you think of before you go to sleep and the first thing you think of when you wake up is NOT money – this is a wonderful place to be in life.

It will be our pleasure to help you get there with a personal budget spreadsheet. Let’s start.

 

First, what’s coming in?

There are two calculations you need to do to find out if you’re living within your means or you’re spending more than you can afford. You have to figure out what is coming in and what is going out.

For your incomings, you need to add up the following:

  • what you earn from your employer (after tax)
  • money you make from self-employment
  • any benefits you receive
  • any payments from pension plans
  • income you make from rental (including renting a room in your home)
  • income you get from a trust

Make a list putting each of those income categories in one column and the amount you earn from each source in the next column. Do these same for the last three months. You may need your bank statements for this.

Add up the totals for the three months and then divide by three to get you average monthly income.

 

Now, what’s going out?

The next thing to work out is what’s going out of your bank account. Again, add up the following items of expenditure for three separate months and then divide by three to figure out your average monthly outgoings.

Things you need to calculate include:

  • Your mortgage or rent
  • Council tax
  • Gas, electricity, and water
  • Telephone (including mobile)
  • Television licence
  • Television subscriptions
  • Broadband costs
  • Supermarket bills
  • Clothing
  • Laundry/dry cleaning
  • Any home help
  • Car fuel costs
  • Costs of commuting
  • Car maintenance costs
  • Pension payments
  • Amount you save every month
  • Eating out
  • Cinema
  • Holidays
  • Sports
  • Cigarettes
  • Alcohol
  • Life insurance
  • Motor insurance
  • Home insurance
  • Medical insurance
  • Daycare or nanny costs
  • School-related costs
  • Children’s clothing
  • Treats for the kids
  • Credit card repayments
  • Loan repayments
  • Maintenance bills
  • Eyecare costs
  • Dental costs

It’s a long list but doing this will give you the best snapshot available of how you spend the money that you’re earning.

 

How is it looking?

If the amount you’re earning is a lot more than the amount you’re spending, you are doing well and you should be fairly well financially insulated against any shock like an unexpected bill or temporary lack of employment.

If the amount you’re spending is more than you’re earning, you’re heading for trouble.

If there is not much difference between the figures, not much would have to change to make your financial situation difficult to manage.

Whichever category you’re in, you can always spend your money better, giving yourself more cash to put into your emergency fund, pay debts down, and occasionally give yourself and your family a treat.

 

Want to spend less each month?

Now you have a clear breakdown of where your money is going, there are a number of quick and simple ways you can spend less money each month without making a significant difference to your lifestyle including:

  • shopping around for cheaper gas, electricity, telephone, and insurance deals
  • buying your food and provisions from a discount supermarket instead of one of the big 4
  • going to work on public transport buying a cheap monthly pass – much cheaper than petrol and parking

Do these and you might save up to £4,000 a year. It’s not just about spending less though. You can raise money quickly by:

  • selling unwanted items on eBay, Amazon, or a similar platform
  • renting out a spare room for up to £7,500 tax free and you don’t even have to tell HMRC
  • asking your boss for a raise – you never know
  • doing freelance work in your spare time – do you have any of the skills offered on Peopleperhour or on Upwork that you could sell for cash?

 

How much should I have for emergencies?

Most financial experts believe that you should have three months’ running money to cope with emergencies. The typical types of financial emergencies that families have to cope with include:

  • Funeral expenses
  • Home improvements and repairs
  • Car repairs
  • Medical treatment
  • Temporary period of unemployment
  • If your self-employed, a slowdown in your sales or your customers paying you later than expected

The answer is different for every family though. Try to think about a level of cash in your bank that you believe would give you emotional comfort – a place in your mind where you feel you are on top of your finances.

 

Is there an app for that?

There are a number of mobile phone apps available that help you budget. Popular free options include Money Dashboard and Cleo. Spendee is free but offers an enhanced paid-for option for £1.60 a month and Squirrel (£3.99 a month) works with a Barclays account to help those who struggle to stay in the black.

All of these apps are compatible with Apple and Android phones.

 

Better budgeting

Being canny with your finances means less time worrying about money and less need to borrow money or use your overdraft.

You can save for some of the nicer things in life as well as having cash put aside for a rainy day.