If you’re in the UK I hope you are having a great bank holiday weekend. Finish reading this article and then head outside and enjoy the sun OK?
How many of you actually have a budget?
OK, but do you actually use it?
Thought not.
‘Budgets’ are like home-exercise machines. They sound great, and just having one around make you feel better at first, but then ‘life’ comes along and it sits in the corner gathering dust.
However if you want a sexy beach-body growing pile of pennies, you really should dust off that budget and try again.
But this time let’s make it work.
Really work.
Here’s five ways to make sure it does:
1) Remember that no month is the same
It’s only the start of May and if you’re in the UK you may have already spent quite a lot of money over this May bank holiday weekend –I certainly have.
There will always be months where you spend more than ‘normal’, particularly as we head into summer with holidays and parties.
If you’re trying to stick to that budget you put together a few months ago you may be finding it difficult. The most important thing to remember is a budget is merely to help you spend consciously: it’s not about depriving yourself.
For this reason it’s important to make a fresh budget every month –because no month is ‘ordinary’. By customising a budget each month, you’re more likely to be able to stick with it and give yourself some control over your spending.
2) Be realistic
How many of you have written an amazing budget that, if followed, would allow you to save lots but by the end of the month the plan was a forgotten memory?
Everyone has.
It’s easy to write a budget, but sticking to it is completely different. The trick is not to be too ambitious when you’re starting out. Once you have gained a bit of experience at estimating your spending, you can begin to trim away any of the ‘excess’, or increase your savings rate, but don’t worry about this at first.
3) Have some flexibility
A budget should not be set in stone: it’s a tool for helping you stay on track with your goals but accept that it can’t solve everything –sometimes you’ll need to break your budget to take advantage of opportunities or do something you simply can’t miss.
That’s fine and don’t feel bad about it. Every time you break your budget, you have an opportunity to improve it so it’s more realistic and you can tailor your savings goals accordingly.
4) Have some non-negotiable categories
Being flexible on your budget is really important if you’re going to keep at it, but don’t be too flexible– have some non-negotiable categories that you can’t rationalise away when you need a bit of extra money in the ‘spending’ part of your budget.
For me, it’s the money I put into investments each and every month for my long term goals. I’ve made it simply unacceptable for me to not save for my future: because that’s important to me.
When I do need to have extra money for the ‘spending’ part of my budget I find it easiest to sacrifice my medium-term goals –like my car savings. Of course your priorities will be different.
It’s important that you think about what really matters to you, and doesn’t matter as much, so when you need ‘extra money’ for expensive months you know where it’s coming from.
5) Don’t worry about every penny
Tracking every penny is a popular tip amongst personal finance writers –it works because we often lose track of the little things we spend money on every day and before you know it you’ve spent everything you’ve earned:
“A small leak sinks mighty ships”
“Many small strokes will fall a mighty Oak.”
Etc…
However, have you ever actually tried this?
I have, and it’s exhausting and for me, makes budgeting more of a chore than it should be. A budget should be empowering.
Ideally you should work towards having a little wiggle-room in your budget so you don’t have to worry about a few miscellaneous expenses. Easier said than done but if you focus on what really matters to you and cut back on as many things that don’t mean as much, then you’ll get there.
Good luck,
And while you’re at it, why not break out that exercise equipment too –because health is the ultimate wealth 🙂
Magical Penny around the web:
Best of Money Carnival #49
Magical Penny is #3 out of almost 50 submissions!
Carnival of Personal Finance: The Origin of the Piggy Bank
Hilarious story with links to the best personal finance writings this week.
Now, stop reading UK and go and enjoy the rest of the bank holiday!
—> Yes that’s me -just some bank holiday fun! —>
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