How to budget
Think 'budget' and the mental image of a middle-aged man brandishing a battered briefcase usually springs to mind. But no, not that Budget, we're talking your family budget - your household's income and outgoings (which, hopefully, aren't quite as scary as the British economy's).
Learning how to budget involves facing some hard truths. The money-coming-in list (wages and/or benefits, tax credits) often looks woefully short next to the money-going-out list: rent or mortgage, food, clothes, insurance, petrol, gas, water and electricity bills, TV and internet, holidays... ad infinitum.
Hence, many of us adopt this Mumsnetter's approach to our finances: 1. Close eyes. 2. Stick fingers in ears. 3. Strike up a chorus of "Lalalalala". 4. Hope. 5. Pray.
But getting a clear picture of exactly what you're spending, on a weekly, monthly and annual basis - and on what - is widely held to be the best way to get a handle on your finances and learn how to budget. If you're already in debt, it can help you to claw yourself back into the black.
Adding up your household spend
You need to decide whether you want to know what you spend in an average week or month. But (and this is an important but), don't forget about the other stuff that adds to your overall annual spend - holidays, children's birthdays, Christmas presents, getting the house painted, the car mended and so on.
- Per week: divide monthly expenses by four, quarterly bills by 13 and yearly bills by 52.
- Per month: multiply weekly sums by four, divide quarterly bills by three and yearly bills by 12.
Get a list from your bank of all your direct debits and standing orders, so you can see the big stuff that's going out, how often and how much. It will include things such as: mortgage or rent, council tax, water, electricity, gas, phone, insurance, TV licence, credit card repayments, nursery fees, car tax, savings and so on.
Next, keep a spending diary for a week or so - every time you spend any money, jot down how much and what you spend it on. At the end of your week or fortnight, add up what you've spent. Multiply it by four or two, as appropriate, to get your monthly spend.
Time-consuming as this all sounds, it will give you a clearer picture of what your money is being spent on and whether there's a shortfall between your income and the amount you're spending.
Your budget will give you an idea of the things you could potentially stop shelling out on (the proverbial daily latte) and be saving on instead.
If you're a dab hand with an Excel spreadsheet, we salute you. If you're not, then there are plenty of free online budget tools and apps to help you get your balance sheet going.
Sticking to your budget
When Mumsnetters post in a panic about how they can make their money go further, the answers they get from thrifty souls generally recommend focusing on the following:
- Gas, electricity and water
- Council tax
- Home phone and internet
- Childcare costs
- Credit card debt
This is because these are the areas of household spending where, by using cost comparisons, shopping around and with a bit of diligence, you can identify significant savings.
If Mumsnet had to choose a specialist subject for Mastermind, how to save money on food would be one of many strong contenders. There are hundreds upon hundreds of threads on Mumsnet Talk detailing how to cut your food costs but, distilled, the advice boils down to:
- Use a slow cooker
- Meal plan
- Get a bread maker
- Grow your own
- Bulk buy
- Freeze food
- Shop online
- Buy own brands
- Don't go shopping hungry
All these tried-and-tested Mumsnetter methods help you cut down on waste and live within your means.
Organising your family finances
There's no one right way to go about organising your money and Mumsnetters have worked out lots of different ways to keep track of their family finances.
The main thing is that it suits you and your partner, if you have one, and that you know what's what so there are no nasty surprises of the large, unforeseen bill variety.
Here are a few different approaches:
"One way might be for both of you to put 75% of your respective take home pay in the family account for mortgage, food utilities, council tax, and holiday with no overspend allowed over that amount. The other 25% is for each of you to have your own personal spending on what each of you want."
"Our joint account is online so that I can check what we have. One account is with a high street bank that we make a monthly payments into and all our direct debits go out of. We have two savings accounts, one for the kids and one for holidays."
"We have a 'receiving' account. All household income (salaries and child benefit) arrives here. From it, a monthly debit goes to :
1. An account for standing orders (council tax/insurances/utilities etc).
2. An account in each of our names for personal spending
3. Another joint account for groceries and fuel
It's a bit convoluted, I suppose, but neither of us has 'cash' access to the bill account, and we just card our fuel and food from account 3. It makes it easier to attribute blame account for expenditure."
What Mumsnetters say about budgeting
- "I write down everything we spend in a little notebook, sub-total it every day, and total-up our weekly spend. It's a real eye-opener to see where the cash goes, and I really challenge myself to spend less and less every week."
- "Just finished the planner and we overspend by £104 a month!!! No wonder we're in trouble. It was really good at thinking of all the things I don't think about usually when I budget."
- "My partner has got all the spreadsheets sorted so we know to the last penny where everything is spent. Have already made good savings on the weekly shop and are now not wasting unused food. Meal planning really helps. Adding lentils to chillies, stews etc pads out the meat. Walk more instead of using the car for little trips. Knock-on benefits: less waste in the bins and fewer inches likely to go on our waistline!"
Disclaimer: Any content in our family money section is intended as general information only. For specific advice about your personal financial situation, get advice from qualified, independent, regulated professionals.
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