HOW TO...(Part I) BUDGET WITHOUT LOSING THE WILL TO GO ON

Budgeting is a path to freedom from financial worry 

updated 7/23; first posted 2017

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Note; All views expressed are the author's own.  The Blogger has no formal experience in debt counselling (except on the receiving end) but did work in finance for a time.  Details are at the end of the post.  All views expressed are the author's.  

Budgeting requires focus, planning and determination.  AND regular treats.    

The biggest mistake people make when trying to budget is to pare things too close to the bone.  Sticking to a budget but living like a pauper is guaranteed to cause strain.  It will eventually put a premature halt to to your budget and heap further misery and anxiety on a household.

Just as dieters need an indulgence day to maintain happiness, so people on a budget need to spend on regular treats.  How much and how often will depend on a budget suitable to your and your creditor/s' needs. 

This post looks at the benefits of budgeting, how to budget, how to reduce spending without depriving your household, and what to do if debts are - or are becoming - unmanageable.

The post may seem a bit simplistic. If so, apologies but 67goingon50 has a broad audience and it's hoped the material will be helpful to all.

Benefits of Budgeting  

Most households are likely to be suffering from financial anxiety during the Cost of Living Crisis and nervousness in financial markets globally. 

In these times, budgeting is probably essential.

Even if you're lucky and finances are good and stable, budgeting is a great household tool. A budget provides the information necessary to help restrain spending and increase savings while still providing creature comforts.  It also helps a household:    

• stay of top of bills (in order to avoid baliffs, court orders and evictions) 
• cover unexpected costs and purchases  
• improve credit ratings if applying for loans or mortgage
• contribute to a pension and holidays 
• reduce anxiety caused by money problems 

How to Budget

'Annual income twenty pounds, annual expenditure nineteen six, result - happiness.  Annual income twenty pounds, annual expenditure twenty pounds six, result - misery.' Charles Dickens' Mr Micawber

Dickens hit the nail on the head.     

Not that long ago, credit was considered dangerous and even immoral.  Most of our grandparents and great-grandparents only bought things when they could do so outright by using savings.

Modern life, though, complicates money matters. 

Debt and the way households respond to it are an important factor in how banks respond to loan or mortgage requests. Go to a bank as a virgin debtor, even with savings, and like as not, the recommendation will be to buy something on credit and pay it off, first.  Very rarely will a loan be granted without an indication of the applicant's capacity

/determination to repay.

In the UK, owning a home is still seen as a vital investment. That encourages people to take on mortgages without fully understanding the effect of cyclical economic forces on a home's value and on the owner's ability to make regular payments.  

Another complication is that it's difficult to manage finances if you're struggling to get out from under previous debt.  Plenty of people are in this position.

Budgets require BALANCE to be successful

Match Outgoings to Incomings to avoid financial angst. 

Four steps to budgeting:  

Step 1: work out how much income comes in
Step 2: work out how much you spend
Step 3: work out where you can save money
Step 4: work out the best way to allocate available funds, including what to do if debts are, or are becoming, unmanageable

STEP 1: 

Calculate Incomings/INCOME: 

1. Earnings from full-time work less taxes and deductions 
2. Earnings from part-time business or work
3. Income from investments, eg dividends
4. Earnings from rental properties

STEP 2
Calculate Outgoings = BILLS & EXPENSES  

These include:

Essential Fixed Payments (essential because not paying them leads to baliffs, court orders and evictions): 

1. Mortgage/Rent
2. Bank loans
3. Heating & Gas
4. Inland Revenue eg Self-Assessment taxes
5. Council Tax

Essential Personal Expenses (Variable)

1. Food
2. Transport
3. Smart Phone
4. Computer
5. Broadband 

Non-Essential but life can be pretty hellish without them (Variable)

1. Savings/Expenses account  (Variable)
2. TV Licence
3. Gym membership
4. Newspapers  (Variable)
5. Entertainment (Variable)
6. Clothes & Shoes (Variable)
7. Make-up (Variable)
8. Laundry & Cleaning Expenses (Variable)
9. Dry-cleaning (Variable)
10. Insurance 
11. Repairs/Maintenance (Variable)

Luxuries (Variable)

1. Furniture (opt)
2. Presents

SUBTRACT OUTGOINGS FROM INCOMINGS:If the result is: 

Outgoings equal to or are lower than incomings, Congratulations!  Read on only if you're interested in saving more money. 

If Outgoings are lower than incomings - which will be most of us - there's work to be done.  Cutting down on expenses will help most;  active debt management with the help of creditors will be required for  many others

Stock Photo  licensed for reuse under the Creative Commons Licence

STEP 3: IDEAS FOR REDUCING SPENDING

Note: If the household is more than 1, discuss & examine alternatives. Maybe there's a trade-off between choosing one expensive option by choosing a cheaper option elsewhere. Decisions should - nearly always -rest with adults  

FOOD SAVINGS

• An essential but controllable expense.  Reducing Food Bills provides an invaluable aid.  Putting a limit on a weekly food spend, even including treats, can save a great deal. Food Budgets also help curb junk food. 

• Also see Freezer Matters

• Make packed lunches for kids and adults.  Be imaginative with salads & soups; avoid too many sandwiches.  For working adults, try casseroles which can be reheated, or even cooked in inexpensive portable containers which avoid queues at the microwave.  For adults who work away from home, don't overdo menu planning; leave one or two days free for impulse meals.  Work must be leavened with a few pleasures and eating out is one of them.

ENTERTAINMENT SAVINGS

• Plan all-day family outings; save up if there's an entrance fee.  Save on food costs by preparing a tasty fugal picnic lunch (baked chicken wings, potato salad, apples). Have a good breakfast at home.  Everyone carries their own bottle of water.  Eat lunch on the grounds or, in some museums, on free seating. Check local free newspapers for Macdonald's vouchers for special burger & chip deals and hide them.  Use them for treats, say after a museum visit on the way home. 

 Natural History Museum

• Popular educational attractions - the Natural History, British Museum and National Art Gallery - are still free.

• In London, some West End Cinema tickets are discounted Mon-Thurs before 5 pm (and oldies are unlikely to be blasted out of their seats by the sound system) 

• Some theatres offer substantial discounts on ticket prices for young adults.

• Concerts, ballet & opera seats at the back of theatres and/or with wonky sidelines are more affordable (though not exactly cheap!)    

• Explore the city on foot; free attractions and galleries are everywhere.

HEATING SAVINGS

• don't heat the entire house if rooms are not needed; if the kitchen is big enough, set up a study area for homework (teenagers sitting vital exams should work alone in their rooms) 

• turn the heating down but layer up: thermal polo necks underneath a shirt/blouse underneath a t-shirt underneath a jumper   

• cuddle up under summer sleeping bags or cheap supermarket duvets when watching telly or reading; use them as extra blankets if temperatures drop unexpectedly 

• use background heating in bedrooms with a small eco-heater for getting into and out of bed; invest in brushed cotton sheets and pillow cases, thick dressing gowns, electric under-blankets, microwaveable bed warmers.

• lobby your MP re: the cost of subsidies for 'renewable energy' which add to energy costs 

TRANSPORT SAVINGS

Walking to Work via the Millenium, Bridge

Courtesy of Getty Images and licensed for reuse under this Creative Commons Licence

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• Get a cheaper pay-as-you-go ticket and walk to or from work (or both); form a group - find local walking companions or put up a notice at work. Substantial sums can be saved and some put toward treats. Galoshes or rubber overshoes, a knapsack, sturdy umbrellas and waterproofs will be necessary.

• Cycing but NOT IN MAJOR CITIES unless there's a cycle path; otherwise only go as far as the outskirts; walk or use public transport the rest of the way 

• Foot or cycling power saves on gym fees; it also cuts calories & appetite, helps you sleep and works off stress.

BROADBAND SAVINGS

• How important is expensive ultra-fast broadband?  Can the household get by with a cheaper, slower but as effective supplier? Reducing broadband by £10 a month adds £120 a year to savings. 

• Broadband on its own is now offered by Sky, Virgin and others.

• Does one family really need 4-5 subscriptions?  Get a grip - make a decision and cut it down to 2.  (One friend goes for Amazon Prime but only during the months there's a 'don't miss' series and at Christmastime. ) A potential bonus:  this may be a key to reducing children's screen time.   

SATELLITE/CABLE SAVINGS

• Not that long ago, it was believed that - with a few exceptions - only an expensive satellite/cable subscription would provide good tv.  That's no longer the case.   

• Freeview is a service available on most televisions.  Many have Freeview incljuded in new tellies; if you're tell's old (but not too old) you should be able to access it, with or without the help of a tv engineer).  It offers Sky news, some sport, lots of old films and plenty of terrestrial and satellite series.  OK, many of them are golden oldies and early runs of popular current favourites but if you haven't seen them before, who cares?  Especially if you're saving money; lots of money.  Freeview also includes new-to-UK riveting foreign drama & crime series through channels like BBC 4 and More 4.  

• Channels like Netflix cost less than £10 a month. NOW boxes serve Sky Sports and Movie fans on a no-contract basis for around £10/mo each (though 67 never got the hang of installing the thing despite 2 tries).

• Set up a film club and include the price of snacks/food in the cost of the ticket. (Check local councils for rules & regs.)

• Watch less television.  Read a book, go for a walk, learn to cook or teach your kids to cook.  

PHONE SAVINGS (Please check 2023 prices)

• We all need portable phones but do we need the whalloping monthly bills that come with some smart phones?

• A 70-year-old friend (hereby referred to as SYOF) who, through no fault of his own, lived on income barely above Guaranteed Income only had an ancient non-smart phone.  Pre Cost of Living Criis, he bought £10 pay-as-you-go vouchers which he made last 6 weeks and occasional £10/month Roaming Passes for 150 calls & texts.   

• Nowadays, brand new smartphones are available, contract-free, for as little as £45 with 'bundles' extra.    

CLOTHES & SHOES

• If you have an interest in fashion, it can be excruciating cutting back on clothes and shoes.  One way to cope is to think of your wardrobe as either everyday or special occasion.   

• For everyday, go downmarket.  Try Uniqlo (which often has its finger on the fashion pulse) and M&S, where well-priced decently made basics can still be found.  Primark is popular with many people but the cut can be restricting and the queues daunting.  

• For special occasions think 'classics-with-a-twist' which will see you proud for a few years.  Don't throw or give them away afterwards; well-made classic clothes always come back into fashion.

• Invest in a reliable sewing machine and learn to make your own clothes; lessons are often included in the price.  As well as adding to your wardrobe at under 2/3 the usual price, sewing fills those winter nights when there's 'nothing' on the telly.

Antique Singer Sewing Machine operated via a Treadlewheel

Courtesy of Wikipedia copyright tahb.blog.spot.co and licensed for reuse under this Creative Commons Licence

• Save up for decent shoes.  Invest in a really good pair of trainers; Nikes and Acsic they'll cost around £150+ but last three years.  

• Check out local pop-up shops.  One in North London near Belsize Park  and sells scads of good quality thermal gloves & socks, scarves & hats at £5 upwards during winter months.  

MAKE-UP SAVINGS

• Again, think  in terms of everyday and special occasion.

• High street brands - don't ignore them.  Max Factor has an illustrious history, starting as make-up boxes for aspiring American actors; some of their lipsticks & mascaras are brilliant. Bourgeois was the budget arm of Chanel and known for its blushers. Rimmel is a classic English brand going back generations.  Boots No 7 is loved by many.  

• Experiment at the lower price range.  If a lipstick doesn't work, layer it over or under another colour or give it to a friend who will hopefully return the favour.

• MAC is aimed at buyers between high street and upmarket; it's mainly on-line but also at Selfridges and Covent Garden.  Their lipsticks, eye shadows and brow products are fab and suit all ages and ethnicities.  Friendly staff offer surprising but madly suitable shades you'd probably never have considered.

• In the past few years, lots of new budget cosmetics have entered the market.  67 tested Revolution; the brow products are good but the company's continuing well-publicised financial difficulties are a little off-putting

• For special occasions, you'll want make-up that makes you feel like a million dollars.  Save up for it in a Budget Account.  Or try the higher quality boxed products which offer big discounts for a monthly fee.  Read upmarket Beauty columns which give a feel for what's available.  Try India Knight in the Sunday Times and the Evening Standard magazine.

• Beauty Tools.  High street chemists are great for these and if you're minded about the environment, Ecotool brushes are reasonably priced.  As for the beauty product of the generation: facial cleansing brushes, there is  no need to spend hundreds of pounds.  They're now available on the net at various prices, and non-electric facial brushes (which work surprisingly well) can be found in High Street Chemists.

• Men's Grooming Products.  For many years women always bought two of her favourite moisturisers at a time, after hers kept mysteriously running out at double the normal time.  If you love him, but two.  But if you love him and struggle with your beauty budget, work out a compromise.

NEWSPAPER SAVINGS

• For readers addicted to newsprint, get your fix by picking up the Sunday Times or Saturday Telegraph. Read the rest online.

Pre-digital Times
Courtesy of carinteriordesing.net  and licensed for reuse under this Creative Commons Licence

• Digital newspaper subscriptions used to be excellent value.  £10'ish a month got you a print copy of the Sunday Times (complete with ink that comes off on your hands for nostalgic oldie journos) and internet access for the rest of the week OR internet access to The Telegraph.  The Mail, Guardian, Independent and Express are still free on the net.  But following the Cost of Living...prices shot up; the Telegraph went as high as £20+ a month.  (The Telegraph's owners recently put the paper up for sale alongside the Spectator, a worrying development for people who want to be intelligently informed without keen political bias.)

• Which is why Digital paper subscriptions have been trumped by Apple's News+, an all-in-whizz-bang digital package which includes the entire Times/Sunday Times and some other UK papers, many of the best-selling must-read global news analysis magazines and literally hundreds of recipes.  It even includes Hello magazine and the like (which intelligent ladies never read, except at the hairdressers, of course!)  67goingon50 was stunned by the huge array of reading material.  All for a little over a tenner a month!  Worth a go for Apple users.  (But 67 still misses the paper copy of the Sunday Times, ink on the hands and all.)

GYM SAVINGS 

Discounts can be available at some gyms for off-peak membership (which start from 6.30 to 9.30 am and end mid-afternoon); for those over 60, for families and for ex-servicemen (check with your local veterans org.)

Nobody needs expensive gear; loose trousers or leggings and a t-shirt is fine.

LAUNDRY & CLEANING SAVINGS

Buy laundry soap and sanitisers when they're on sale.  Set aside 50pence a week in a jar in to cover the cost.

DRY CLEANING SAVINGS

• For non-special-occasion clothes, find a laundromat which has a dry cleaning machine - they do still exist - but air clothes well before wearing.   
• Put aside £2-3 a month in an envelope to cover special dry cleaning so it doesn't wreck your budget.  Quotes for a waist length padded winter jacket start at £30!!!!

INSURANCE SAVINGS

• Ask friends who they use and why they made their decision
• Check out comparison sites but remember some good value firms are not on the sites
• Take note of tv ads; do your research

REPAIRS/MAINTENANCE SAVINGS

• take a course in home repairs (and when you're up to speed, sell your services)
• do a job swap with neighbours/friends

Also see: 50 ways to save money from Which guides 

Step 4: go to (How to Budget Part II...How to organise my outgoings)

Work out the best way to allocate available funds, including what to do if debts are, or are becoming, unmanageable



B Lee/Bright Sun Enterprises accept no liability for the consequences of any actions taken on the basis of the information provided.

B Lee past financial career
The Blogger worked in international banking and explored personal finance through journalism and financial public relations.  She was co-author to currency guru, now Lord (Howard) Flight: 'All You Need to Know About Exchange Rates'. (pub. Sidgwick & Jackson Ltd 1988).

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