If you’ve spent a little too much over Christmas, you can use the time before New Year to get your finances in order for January.
To really cut your spending and start saving, you need a detailed account of where you’re money is going and a budget spreadsheet is a great place to start.
There’s no one way to create a budget as each person has different things they need to prioritise.
While you might have scribbled some things down in a notebook before, writing a serious and detailed budget can make a big difference.
Rachel Harte, Head of Financial Planning at Claro, explains: ‘Making your finances visible by using a money spreadsheet is a great place to start.
‘Once it is clear where your money is going you will start to be able to make changes and become more mindful with your money as we head into 2021.’
Make it easy to access
Rather than choosing a notebook or a document saved on one computer, use a cloud based spreadsheet like a Google Doc or an app specifically for money management.
Make it accessible on your phone, computer, and tablet so you can note things down as they happen, rather than saving them up and forgetting.
If you’re budgeting with a partner, you can make sure you both have access to keep track of your shared finances.
Start by working out how much you must spend each month
While you might have a vague idea, sometimes when you really note down every single bill, you’re surprised at the total amount.
Include every regular payment you make on the spreadsheet by going through your bank statements for the last few months.
Hayley Millhouse, MD of low-cost financial advice platform OpenMoney says: ‘It’s a good idea to review the past few months expenditure and create a monthly budget including mortgage/rent, bills, groceries, transport costs, spending money and savings.
‘Understanding where every penny goes can help identify where you’re potentially overspending.’
Where could you cut back?
Use this as a chance to look at anywhere you could easily cut costs.
If you’ve been paying for a subscription you aren’t using – end it.
If you’re out of contract with your internet service provider or energy company, look at switching, or call them to see if you can get a better deal.
Structure the spreadsheet
Start your spreadsheet by putting in all your essential spendings.
Once you’ve added up your total essential expenditure on the spreadsheet, take it away from your monthly income.
Then work out what you need to spend – and put a figure towards saving.
Be realistic and don’t cut back so much you can’t stick to it. It’s better to overestimate and put some back into savings at the end of the month if you have a little spare.
Rachel Harte, Head of Financial Planning at Claro, said: ‘We get it, looking at your finances is scary, however making sure you have eyes over your money is the first step to making good choices in the New Year.
‘The first thing we recommend is making a monthly spending spreadsheet with regular outgoings such as bills, along with things like trips to the hairdressers, weekly food shops and the cost of filling up the car clearly laid out.
‘A selected amount of money put aside for savings should also fall into the ‘Essentials’ section. Whether you are putting aside £20 or £200 a month it all adds up!
‘After the essentials are laid out you should be able to clearly see what you have left for treats, such as nights out with friends, a new pair of trainers or whatever your heart desires. Allow yourself to spend – just make sure you know how much you have to splurge.’
Create an emergency fund
If you suddenly have to pay out for an unexpected bill, the budget can quickly fall apart.
Adding a little to an emergency fund each month can help you stay on track.
If you do have to dip into this, make sure you try to restore it as quickly as possible.
Divide your money according to the spreadsheet
When it comes to payday, take the money you know you need to pay out and set that aside. You can do this by paying your bills from a separate account, or some banks include a pots feature, allowing you to divide your money up in one account.
Put the money you want to save into a savings account straight away too.
If you’ve given yourself a realistic spending budget, you should be able to work with what is left in your account.
Keep track of what you’re spending in each category so you can review it. You may find you need to up your disposable spending slightly but it’s better to do that and stay on track.
Having to dip into your savings is a bad habit and can escalate quickly.
Keep your spreadsheet up to date
As well as updating it throughout the month, bookmark some time to work on it every month just before your next payday, to plan for the weeks ahead.
It takes some planning but dedicating time to maintaining your budget will really help you stick to it and meet your savings goals.
If you want more tips and tricks on saving money, as well as chat about cash and alarms on deals and discounts, join Money Pot, our new Facebook group.
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