19 April 2023
Budgeting in a Cost of Living Crisis
The cost-of-living crisis has made managing money harder than ever, with interest having once again risen to combat spiralling inflation and coming out of a winter with electricity bills through the roof for many, it is understandable that budgeting is something that may be causing us more anxiety than ever. But, even if you haven’t had to think about money in the past, you may now be feeling the pinch of increased prices, with bills on the up and wages for many staying the same.
If you’ve never budgeted before or have but are struggling as you tighten your spending, read ahead on how you can budget for the cost-of-living crisis and make it, for many, a way back to financial confidence and stability.
Why is Budgeting Important?
Budgeting may for many, be looked down on as something for those who have to “watch their spending”, but as we have covered in the past, wealth is not linked to how much money you make, but how effectively you manage the money you make. Even if you earn a respectable amount, budgeting is incredibly important for keeping on top of your money and understanding your spending.
View a budget is a plan. A plan that shows you where your money is coming from and where you want it to go. It is the map that you use to get your finances from where they are to where you want them to be. For example, imagine setting out on a long, unfamiliar trip with no map and no sat nav. You might get there in the end, but you will likely take a few wrong turns on the way.
A budget makes the process easier. It gives you clarity on your money and most importantly gives you control over your finances. This is vital, cost-of-living crisis or no.
Can Everybody Budget?
Of course, they can!
You might think that you can’t budget because you don’t “earn enough,” or you are self-employed, or you get paid irregularly. The good news is there’s a budget out there for everyone.
The only problem is that you likely weren’t taught HOW to budget. Not only that but your budget is personal to you. Hence why it is called personal finance and not general finance.
So, how do you budget? Well-
Know Your Numbers!
There should be no guesswork whatsoever in your budget plan. A budget is all about facts and figures, which means you really need to know and understand where your money is going and where you want it to go and, due to inflation, some of those facts and figures have likely changed since last year.
If you’re completely new to budgeting, then a good place3 to star tis by looking at your bank statements over the last few months. This will be pretty telling instantly as to where your money is coming in, your salary, benefits, bonuses, interest – make a note of it all, where it came from, and when.
Then, do the same with your outgoings – any bills, subscriptions, rent, etc. Then finally, your variables, so outgoings that change monthly such as food, travel, and entertainment.
As a bonus tip, it is a good idea to keep a close eye on your statements from now on – as not only will it make you more aware of your spending long term, but should anything odd come up, you’ll be aware of it sooner rather than later!
Be Honest with Yourself!
Looking back on your statements can be hard, as you may identify some spending patterns that you’re less than proud of but be honest with yourself and your spending. Don’t attempt to push any of it under the carpet otherwise you’re setting yourself up to fail.
You can be honest whilst also recognising that you could improve your situation. It is important though that you start from where you are at.
Make a System
A budget is pointless if it only exists in your mind. You’ll find things a lot easier, and real, if you have them written down somewhere.
You don’t have to necessarily write it down with a pen and paper, we know people who have excel spreadsheets, where they record when things are going out and tick them off when they have, a word document or notes on their phone. Your budget is personal to you, so record it down in a way that works for you.
Make a Game of it!
Budgeting can be boring, so why not make it interesting? If you don’t you run the risk of not keeping with it long term.
Why not make a fun game to try and challenge yourself to spend less and less. Or alternatively to save more and more?
One way of doing this is to highlight an area you want to work on. This could be your food spending for example. Then for the month ahead, you go all out to try and lower your spending in this area as much as possible!
Then the following month you try a different area. This could be something such as your utilities or subscriptions you don’t use. You will find yourself getting creative about how you can lower these costs and keep them down. It can be a fun game to get the whole family in on too!
Some months can be harder than others, but its vital not to give up! Perhaps you weren’t able to put any money into savings one month, or you found it harder to keep those food costs down than you expected, but its vital that you keep at it! Budgeting will pay off in the long run, and you will be thankful that you started!
If you’re looking to save money, why not open a savings account with us? Not only have we offered a dividend every year for over twenty years to our Smart Savers, having just offered our most recent one, we have a range of savings account son offer from Junior Savings all the way to Christmas! Begin your journey to financial confidence and freedom today!