Inflation rates are at the highest they have been in decades, leaving many UK households struggling to meet their usual monthly expenses. Here we share our top 5 best budgeting tips to help you manage your money more effectively.
- Track your spending
Before making a budget, you need to be realistic about where your money is going. Take a look at former bank statements for an idea of what you are spending most of your money on and areas where you could potentially be cutting back. Understanding your expenses and what is essential versus luxury is an important starting point for any budget. Financial experts recommend looking at a minimum of three months’ worth of spending in order to assess your spending patterns.
- Follow a plan
There are many different budgeting plans that you might want to consider, the most common of which is the 50/30/20 rule. Financial experts offer this rule as a guideline when making a budget; it refers to 50% of spending on essential spending, 30% on non-essential spending, and 20% on savings and debt.
Essential spending refers to anything that you need in order to live, including rent or mortgage payments, groceries, transportation, and childcare. Non-essential spending, on the other hand, refers to anything that might be a luxury, be it hobbies, holidays, dining out, or buying the latest gadgets. Based on your spending habits, you can decide what is essential and non-essential and can adjust the ratios accordingly.
- Shop around
Whatever you are shopping for, be it your weekly groceries, a new car, energy provider, or an insurance policy, there is a multitude of cost comparison sites at your fingertips. If you are looking to cut down on your spending, you can make sure your purchases are as savvy as possible by taking advantage of these tools.
Once you start shopping around, it becomes clear that you could be saving money in many areas of your expenditure, both essential and non-essential. For example, with your weekly shop, you can use cost comparison sites to find the supermarket that offers the cheapest options for your frequent purchases. You can also look for coupons, special offers, or even switching brands to save money.
Similarly, it is worth looking at any existing contracts you have to see if you have the most competitive offer available. This could be for anything from home insurance to mobile contracts to energy providers. Taking a bit of time to do some research and compare different options might save you a lot of money in the long run.
- Automate savings payments
It can be difficult to save money, especially if you are struggling financially. However, it is so important in the long run to have money saved that you can fall back on should you need to make a big purchase or cover an unanticipated expense.
A good way to save money for the future is to set up automated payments that put aside a certain amount of your income per month automatically. Based on your budget, you can work out what might be a realistic amount of money to save each month. Doing this automatically means that you are not accidentally spending your savings and will ensure that you will have some money to rely on in the future.
- Maximise your income
Getting a new, higher-paid job is not always a realistic option. However, there might be other ways that you could boost your income. Looking for a side job, part-time work, or freelancing might be a viable option to monetise your skills and improve your overall income. If you are currently employed, there might be the option of picking up extra shifts, looking for internal promotions, or working towards a company bonus.
Another way you might be able to maximise your income is by selling any items which you no longer use. Getting organised and decluttering your house may unearth items of value that you could be able to sell for a profit.
Author Bio: Daniel Tannenbaum
Daniel is a London-based financial consultant who has worked in fintech for over 10 years.