If you feel like you’re stuck in a financial rut, juggling money to pay bills, or struggling to put a bit aside for a rainy day, something needs to change.
Waiting for the ideal time to start managing money better means you’ll never start, because there will always be bills to pay, unexpected expenses to cover, or emergencies just when you think you’re starting to get there.
The time to start budgeting for a better future is right now, regardless of how tough or how stretched you might feel in the money department; this is especially important if you’re working on improving your family finances.
Daily Budget Monitoring
Keeping a daily tally on what you spend is a good place to start. Don’t worry about cutting back, diverting funds into savings or anything else. The very first step is getting a thorough understanding of where your money is going and where it’s coming from.
Everyone with a bank account has a statement, either paper or online. But this isn’t enough because it’s too easily overlooked. The best statement of finances is the one you create for yourself.
When you write things down, they stay in your mind better. You create an overall mental picture of how cash ebbs and flows through your life, and your understanding is much deeper than when you rely solely on a statement provided by the bank.
Of course, bank statements are important too. For one thing they remind you of your direct debits each month, so it’s vital you carry on checking your statements as well as taking personal control.
Keeping Things Simple
Tracking daily spending is easy and can be done with no more than a notebook. Here’s a very simple system:
Have four columns on a page, with these headers.
- Date: This is the date of the transaction you’re recording.
- Item: This is what you bought, or it could also be where income came from, such as salary, sales, or wages.
- Cost: This is the amount, either spent or earned.
- Balance: This is your running total of money available.
Every time you make a transaction, the amount in the balance will change. You’ll subtract anything you spend and add anything you earn.
To get started, you need an opening balance, and this is where you’ll look at your bank statement to find out how much you currently have to spend. While you’re looking at your bank statement, add the direct debits into your notebook, with the dates they’re going out and how much they are. Adjust the balance accordingly, even if they’re going out in the future. That way you don’t forget them and end up thinking you have more funds than are there.
Keep on filling in the tracker every day, or every time you spend or earn money. Don’t worry about anything else for now. Just get used to keeping track. Once you start, and see a personal history developing, it can become quite a fun exercise and very revealing. Although it’s a simple system, it’s actually the basis for all accounting, even for businesses, although naturally there’s plenty more involved in professional accounting.
Depending on how many transactions you have, you might need a new page every week. Most people start afresh each month. Take the ending balance from the current month and fill it in at the top of the column for the new month.
Practical Small Steps
When you have a couple of months of daily transactions recorded, you’re in a strong position to begin controlling money. One of the most effective ways is to look at your categories of spending. You’ll see your categories of spending in your ‘Item’ column.
Categories could be groceries, utilities, motoring, entertainment, clothes, makeup, kids’ stuff, hobbies… the list is almost endless. Sometimes the money spent in those categories can be surprising, even if you think you know your spending patterns.
Once you see clearly where money is going, you can start deciding where to cut back. Making informed decisions like this is much more effective than randomly trying to just spend less.
We generally tend to cut out the nice things in life, then fall back into old patterns because we miss having treats. A better way is to find the most expensive items and then search out cheaper alternatives.
Building Firmer Foundations
As well as finding ways to trim expenses, look for ways to increase your income.
Could you go for promotion in your current job? Or find alternative work that pays more? Maybe do some extra training (you could even learn accounting online if you’ve found some satisfaction in digging into your own finances) to open higher paying doors. Investigate funding or grants and bursaries if you’d like to train for something new.
Alternatively, what about starting a small business on the side? Reselling via auction sites or selling handcrafted items are popular ways to make extra money. There are also online opportunities, and plenty of advice on smarter spending, saving, and making money work harder for you.
Even if you don’t continue with a personal budget tracker, give it a try for a few weeks. The more you understand exactly where your money is going, the more chance you have of controlling it. And when you can control your money, you can begin budgeting for a better future.