Today’s post is incredibly important. Whether you’re a full-time student, you work three different jobs or you’re a full time blogger earning thousands a month (that’s the dream!), this post will be helpful for you.
One of the most important things when talking about wellbeing is avoiding stress. Stress triggers anxiety and depression and many other mental health problems that seriously none of us wants to go through. And one of the main causes of stress is money. Financial stability is, in fact, one of the main factors that go into living a healthy and happy life.
I don’t particularly like money, if I’m honest. If it were for me, I’d live a life with no money because I think it can be a burden for some people. But we do need money to survive and having money and saving money can be a lot easier than you think. What you need to do is budget and do it the right way.
Today I will show you some effective ways to get your budgeting to the next level; step by step I will guide you into creating the best budget sheet for your needs. This is a massive topic and for better understanding purposes, I will divide this post in 4 sections:
- Before you start budgeting
- Create your budget
- Manage your income/spendings in numbers
- Make more money
- Keep it up and stay motivated
Before you start budgeting
What is budgeting and why it’s important
Let’s start with saying that budgeting is a sacrifice that you make. It’s your choice to live your life payslip by payslip and spend all your money as soon as it gets into your bank account, but doing that will certainly have a drastic effect on your future.
If you’re young and still at university, it’s almost impossible to ever have any money in your bank account. And once you do have money, you tend to spend it on a night out. That’s fair enough, you want to live your life as everyone else does but if you want to have a much easier life once university is over and done with, then you may want to do the following things.
Check your bank accounts
Whether you have an app or you want to go the old way on paper, checking your balance regularly is a must. The simple reason is that we need to know where our money is going. Take a look at what you’re spending your money on, how many times a week/month and how much of it you’re spending.
Ask yourself why you’re spending money.
This is so important. We rarely sit down and ask ourselves why we bought that dress or why we had that posh dinner the other night. And it something that we all should be doing and here’s why.
When you look at the amount of money your spending and what you’re spending it towards, ask yourself if you’re doing it for yourself or because everyone else is. For example, you spent £30 on a eyeshadow palette. Do you really need or want that palette? Or did you just buy it because your friend did or everyone has been raving about it on social media? Be wise with your money. If it’s something you really are doing for yourself then that’s great, but if you’re only doing it to be like everyone else and ‘fit in’ then stop right now.
It’s better to look broke and have money in your bank account than look expensive and being broke. What you see on social media is not always real, you don’t know where these people are coming from. Especially if they are students, it could be their parents money and not theirs – yet you went broke to be as trendy as them, not their parents!
Don’t spend more than you have
This may seem obvious, but for some people it may not be. With all the credit cards and Paypal credits and everything, it’s easy to fall into thinking you have more money to spend than you actually have. If your bank account says your balance is £100, that’s all the money you have. It doesn’t matter that Paypal says you can use £1000 of their credit. That money is not money you have and it’s only safe to use it when you can pay back straight away. Otherwise you end up having to pay interests you really don’t have to pay or, worse, ruin your credit score by missing credit cards payments.
If you want to spend £200 on your credit card, make sure you have that extra £200 in your bank account to pay it off straight away. Use credit cards to build your credit (more on this below), not to pay for things you can’t afford.
Use your credit card, cash is hard to keep track off
To make sure your budgeting is done right, you need to have a summary of all your expenses. This is a lot easier if they money you spend, you spend it paying by card. That’s because it’s easier to keep track of all your movements through an app or bank statement, whereas paying cash means you have to keep all receipts and that can be a massive headache everyday.
Budget for the whole year as well as monthly/weekly
Depending on how strict you want to be with your budgeting, it’s useful to create a budget overview for the year and one for the single months and even single weeks. This is literally up to you and how much of a planner you want to be, but I find creating all three of them is really the best way to keep track and save as much as you want.
Check your credit score online
Many people don’t think about their credit scores until they have to get a mortgage or apply for a loan of any kind, but starting to think about this stuff early in life really makes a huge difference!
It’s very easy to check your credit score, there are many websites online that offer credit score checks for free. Most of them give you an overall score without going into too much detail and the detail you have to pay for, but even that initial overview is good enough to start. I personally use Experian and go back to check every month or so.
Once you know your credit score, you can build it up to being as best as it can possibly be. I’ll tell you more about this as we go on.
Create your budget
Now that you’ve done all the prepping, let’s get to the actual budgeting.
Some people budget on softwares like Excel and some people do it on paper. I like to do both because I’m just obsessed with planning. I use Excel for making the numbers match, but I prefer writing it all down in my planner too because I don’t like spending too much time on my laptop and my planner is literally my life. And I also kinda like using the good old calculator!
I invite you to get pen and paper and start doing this budget as you go along reading the post. I sell printables for planners if interested in some pretty but efficient planning and they will be available very soon on this blog – so keep an eye out!
Set yourself a goal
This is the most important step of this whole post, without this you’re going nowhere I’m telling you! Budgeting and living on a budget can be intense and sometimes a bit daunting, so you need to have a real reason why you’re doing this. If you tell yourself ‘I’m gonna save £10,000 this year’ but don’t give yourself a reason, it’ll only take you the first month to lose faith in it and going back to splurging a bit. It’s so easy to lose focus, so it’s vital that you have a specific goal set, both in numbers and words.
So, for example, you can write:
Goal – Save £10,000 for a mortgage
Separate bills from all your other expenses
I personally like to separate all my expenses too but if you don’t like that I still recommend you to separate your bills from your expenses. There’s a very simple reason, bills are something that is fixed and you have to pay every month no matter what you’re doing with you life. Expenses can vary.
This means that the budget for bills has to be a fixed one with no opportunity to make changes to the numbers, whereas the budget for the expenses you can play around with a bit more. This separation also allows you to know the exact amount of money that you actually need to go on with your life and you can add all the expenses you need/want to that. Lastly, it makes it easier to divide your income when it’s time to pay, and I’ll explain more below when talking about managing your income.
Calculate your actual budget
This is pretty self explanatory and the easiest part of all.
Once your bills and your expenses are all there, you need to sum all those numbers up and subtract that amount from your income. The amount you get from that subtraction is what you have left to spend or save.
Divide the result
Now, you can go two ways. Either save all of that money that’s left, or divide it into percentages. Think of it as a pie you will divide into three sections. You don’t want all these sections to be the same amount, so you split it this way for instance:
50% go towards investments
20% go towards nights out/fun
10% go in your savings
Save a minimum of 10%
I would advice to set a percentage of your income you’ll save every month. That’s completely up to you though, if you prefer saving a different amount of money every month based on your monthly expenses then that’s fine too.
But I would definitely say save at least a minimum of 10% of your income per month.
Manage your income & spendings
Your budget is all done, now how do you manage all that money and expenses? Here’s how you win at it…
Pay your bills first
This goes with what I said earlier on diving your bills from you expenses when budgeting. Apply the same principle to your bank account and every day life. As soon as you get your payslip and your money, pay the bills. Then you can use what’s left the way you’ve planned on your budget.
Create separate accounts
I find this very useful. I personally have three different accounts: one for bills, one for savings and one for all the rest. The one for bills is pretty self-explanatory, the one for savings I get interests on (just apply for one at your bank, you don’t need to go through any credit check) and the last one is the one linked to my debit card.
This way every month I move money to my bills account as soon as I get paid, I put my chosen percentage of income into my savings account, and I keep the rest on my debit card for me to spend and manage.
Another trick is, if you use your bank app on your phone, to hide some of these accounts from you main page. I, for example, hide my savings account. I put money in every month but because it’s not on my homepage and I don’t see it, I almost think I don’t have that money anymore. It’s a great way to trick your mind into keeping those savings as they are and never be tempted to get a few quids from them for some extra shopping. I don’t know if this is an option that every bank’s app offers, but Barclays – in my case – sure do. It may be worth checking your app out for this feature!
Finally if you invest money in stocks and shares, you may want to create another account too. It’s completely up to you.
Build your credit score
If you pay bills regularly and are very constant, you’re likely to have a good enough credit score already. If you want to build it up, you can do it through – for example – applying for a credit card.
The way you do this is by making small purchases that you repay straight away. The best way to make sure you don’t miss any payment is by setting up a direct debit from your account to your credit card, so you don’t have to worry about it.
You need to be careful with credit cards though. If you don’t trust yourself with the idea of having a credit to spend, then this option is not for you. I personally never applied for a credit card, I don’t really like the idea of having too many cards in the first place. And my credit score is still good!
Be tax efficient
Sounds geeky but it’s really not. What I mean by this is that tax is a pain and often can lead to freak outs if not dealt with correctly.
If you’re on a PAYE system, meaning you work for a business that pays you, then your tax is very easy. HMRC does all the counting for you. BUT it happens that they overcharge or undercharge you for some annoying error with your tax code, so make sure you stay on top of it. If you think you’re paying too much tax, then call them straight away so they can fix your tax code problems and issue you a tax refund.
If you’re self-employed then make sure to really really really stay on top of it. If necessary even get an accountant once a year to help you fill in all the forms. You don’t want to get this wrong, otherwise all your savings will be lost in repaying tax to HMRC!
Compare prices when shopping
This is something we often forget about. What we find one site for £100, we may be able to find somewhere else for £50. This is obvious when it comes to homeware, furniture and electronics, but it’s often also true for clothing and fashion in general. So make sure you compare a few sites before making your purchase, the less you spend on buying that product the more you can put in your savings account!
Stick to your budget
Do I even need to say this? After all that hard work calculating your budget, you seriously have to stick with it! Don’t go over the amount you set to spend on clothing, it’s really not worth it. See the bigger picture and if you’re struggling then don’t worry because I have some tips on staying motivated too at the end of this post!
Keep the receipts and catalogue every week into months
I almost never pay cash, so I can follow all my spendings on my bank app. But if I do pay cash, then I always keep the receipts otherwise god knows how much money I’m spending without even realising! I catalogue all the receipts in my trusty planner week by week so that I end up with a month overview of where all my cash has gone.
Make more money
This can be tricky. In this specific post, I mean ‘investing’ as investing in yourself and your skills. By all means invest in stocks and shares if you know your way around it and, if you don’t, definitely learn more about it. I personally don’t invest in anything but myself, not yet anyway.
The ways you can invest in yourself are infinite. If you’re a blogger for example, you may want to invest in buying your own domain or that theme that you fell for. And you do this because you start from the idea that your blog will hopefully take you somewhere. So you spend money now in order to make your content the way you want it to be, thinking it could make you a profit some day. Another example is a paying for a course in a field that could create more opportunities for your career. Really the options are endless, but remember that this is a long term investment and you rarely will see any money from it straightaway.
This is a bit more geeky for sure. If you’ve never heard of compound interest, it’s a concepts widely used in finance that can make you really good money.
The way it works is that a bank pays interest on original amount of money in your account and also on the interests that account has already earned. For example, if you have £20,000 that you know you don’t really need to survive, put it in an account that pays good interests and leave it there. Don’t touch it, leave it for ten years. This way that balance will grow at an increasing rate and after ten years you may go back to that account and find out you have enough money to buy a house!
It’s really worth diving into some research on compound interest if you have some money already saved up!
Keep it up and stay motivated
Losing focus and never seeing the finish line can bring you down big time. But you can’t give up, remember that goal you set up a the beginning? Remember why you’re doing this?
Watch videos, create moodboards or scrapbooks
If you’re struggling, go get visually inspired and motivated. If you’re saving for a house, go look at houses on sale online. If you’re saving for travelling, go on Youtube and watch as many videos as you possibly can to get yourself in the right mood again.
Create moodboards, fill your house and everything around with visuals that remind you of the bigger picture. Some people love scrapbooks and that’s another amazing way to get motivated too!
Don’t give up until you reach that goal, because once you do you’ll be the happiest you’ll ever been!
Rome was not built in a day
This is a concept I know I will be talking about a lot on this blog. Things don’t happen just like that. Everything needs time and commitment.
We live in an age where, especially the younger ones, expect everything to be done straight away. We’re so used to text someone and get an answer the minute after or get engagement within seconds on social media. Real life is not as quick.
Success needs patience, just as Rome wasn’t built in a day!
Brag about your savings!
This is a bit of a joke, not gonna lie. But it’s also kinda true.
What I mean by this is, when your friend tells you about the new pair of shoes they just bought, answer with your plan to save money to go on and travel the world. Not only everyone will be looking at you like someone who’s got their ish together, but they will be regretting buying that pair of shoes when they’ll see your Instagram post from Thailand!
This is really it for this post. It is a massive post and if you got to the very end, then I’m positive you’ll have great success with saving your money!
Thanks for taking the time to read this and stay tuned for my a new post every Monday, Wednesday and Saturday!