Analyse your finances
Overspending is the single most dangerous threat to your finances. It can spiral into catastrophe.
Everyone tries to do a budget. But most budgets don’t work because they concentrate on expenditure in a typical month. It forgets the daily coffee treat, holidays, Christmas, a new sofa every five years – your true spend. We spend on 100 things, not 10.
Broad categories such as motoring make it too easy to forget the small things that add up. Think MoT, tyres, petrol, insurance, breakdown cover etc. Sit down with at least three months’ worth of bank/credit card statements and assess your true spend, then look over the whole year at big annual spends and regular one-offs. Divide them by 12 to factor them in your monthly budget. I’ve a free automated tool at budgetbrain.com that’ll do it for you.
Once you know if the books balance, it’s worth trying pain-free savings – cutting the costs on things that don’t change your lifestyle. Even if you’re underspending, it’s worth doing this as it can free up cash for things you’d enjoy.
Once you’ve saved pain-free, change budget figures to reflect the new, hopefully lower costs. If you’re now spending less than you earn, great. If not, it’s time for…
These involve cutting or curtailing things you do. Yet small things make a big difference. There are roughly 250 working days a year, so even giving up a 50p daily pack of crisps would save £125 a year. So… do you need all your Sky channels? Can you cook rather than get takeaways? Do you need a car, could you sell it? Stop smoking? Go through it all, ask yourself: “Is it important? Could I cut back on it?”
Write each possible saving on a piece of paper and move it in order of your priorities – it helps you realise that to protect those at the top of your list, you need to cut those at the bottom.
How to stick to a budget
My piggybanking technique helps. Pick major categories that suit your lifestyle and set up separate bank accounts for each, eg accounts for bills, family food, big purchases, holidays, Christmas and emergency fund.
Then come payday, simply have standing orders shift the amount you’ve allowed for each from your main bank account to the piggy banks.
Whatever’s in each account, including the main one, is spendable. Want a £600 holiday and there’s £400 in that account? You CAN’T afford it – you can no longer fool yourself. Good luck.
One of the main purposes of this site is to pass any of our layman’s advise and experience we have had over the last 4 years on to anyone who is having issues with their Boundary Disputes.