Better Budgeting for Stress-Free Finances
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Budgeting is tough but unless you’ve got bottomless pockets, not doing it can end up being tougher still. Constantly going without life’s little pleasures as you try and balance the books isn’t really the answer either as constant self-denial can cause its own kind of stress.
So what to do? Dive right in and figure out what your money’s up to: Where it’s coming from, where it’s going, and how you can control the flow.
A Really Simple Records System
All you need is a notebook and pen. If you like computer work, you can set up a spreadsheet, but a notebook does the job and is portable for recording spending on the fly.
On a blank page, make five columns and give them these headers, starting from the left:
Under these headings you’ll fill in your financial information, like this:
- Date – When the transaction happened, whether it’s money coming in or payments going out.
- Item – What you bought, whether it’s grocery shopping, motoring, or a household bill for example.
- Income – Payday. How much came in.
- Cost – How much you spent.
- Balance – This column shows the amount in the bank right now. Subtract the amount you entered in the ‘cost’ column and add the amounts you put in the ‘income’ column.
Setting this system up the first time is the hardest part because you need to sit down with your bank statements to make sure you’re including standing orders or direct debits. Leaving those off your written information will mean you don’t have an accurate balance and it will be misleading.
After that, it’s a fairly easy and quick job to keep the system up to date.
You can start a new page as often as you need one, but for most either weekly or monthly is often enough.
The only thing to remember is to carry the balance from the previous page over to the new page so you have a starting figure.
This simple system is the basis of all bookkeeping, and hopefully you can see it isn’t too much of a challenge. It can become quite addictive to monitor and record money, and the more you know about how accounting works, the more satisfying it is.
Use Your Receipts
Unless you’re in business, the only time you need to keep hold of receipts is in case you need them to prove your purchase.
Every other time only keep them for as long as it takes to transfer their information into your notebook or spreadsheet.
If you tend to gather a lot of paper receipts, you might want to go through them and transfer the amounts every day. If you don’t get that many, you can make it a weekly task. Once you get into the habit it won’t take longer than a few minutes each time.
Use Your Data
Over a couple of months, you’ll start to gather a block of information that you can use to improve your budgeting.
Within your records, look for:
- Recurring expenses: do you need them all? Is there any way you can reduce the payments? Maybe you can cut bills by switching suppliers, or ditch subscriptions you’re not getting full value from.
- Spending Categories: Tot up your grocery purchases, or your fashion/clothing spends, your motoring costs, or your take-out meals each month.
Pinpointing where money is going lets you make informed decisions about whether to carry on or cut back. You might be surprised how much movie rentals are adding to basic subscriptions each month, for instance. Spontaneous purchases of a couple of Euro here or there are easy to shrug off, but when you add them all up it can be a bit surprising.
When you know what your money is doing, you’re in a stronger position to direct it where you want it to go. Save up for something special (like your next family holiday?) or put a bit more away for retirement, or just juggle more effectively so bills are easier to deal with.
You’re in control, and that’s a very stress-relieving feeling.