Savings and budget with piggy bank

‘Kelly’s Know-how’ – January 2021 edition

As we make our way through another January, many of us are thinking about new year resolutions.

Top of the list is often creating a better budget, exercising more, eating healthy, learning something new…

These are all things that can make us feel better. So in this month’s know-how, we are concentrating on budgeting.

I’m sure you will agree with me that the last 10 months or so have been quite challenging for each one of us. Many have had financial hardships and had to learn to live on a lower income.

This is when budgeting is a really useful skill, however budgeting should ideally be an ongoing habit.

Having a budget means having a plan for spending money. You allow each category a certain sum that you can spend.

There are different steps to follow:

1. Calculate your income and expenditure. Gather your bank statements, bills, receipts. Preferably 3/4 months worth so that you can include everything and gauge average costs.
2. Create different categories of expenses. Essential, non-essential , ad-hoc expenses allowance, regular investments, holidays, emergency fund etc. Add as many as you like as long as it helps you remember and follow the plan. Imagine these categories as pots of money.
3. Assign a specific amount of money for each category. Referring back to the pots of money, you can only use the amount in the pot, once it’s gone it’s gone. Remember to be realistic. The reason for many budgeting failures is being too restrictive and underestimating the actual figures.
4. Use tools to track and follow the budgeting plan. It could be the old fashioned pen and paper, an excel spreadsheet or a budgeting app.
5. Review your plan regularly and especially when a change of personal circumstance occurs.

This sounds very simple – spend according to the plan and never spend more than what you earn. But in reality, it’s always easier said than done!

That’s why I’m sharing some personal tips that have helped me with my budgeting over the years.

We all know that essential expenses are, as the name suggests, ESSENTIAL. That means we normally always plan for these expenses.

The difficult part is the non-essential category.

I ask myself the following questions before buying ay products or services:

1. Do I need it?
2. Or do I want it?
3. Will I use it?
4. Are there any cheaper/ better alternatives?
5. Is it worth it?
6. If I need it, can I buy it when there are sales going on? Or get some cashback?

I also like to place the things that I want in the online basket and leave them there for a week. If after that time I still want them, than I would review the above questions again. Or it’s even easier when things go out of stock and therefore the decision is made for me. Also, some sellers will see that you have items uncompleted in your basket, and email you with a discount to encourage you to purchase, so you can sometimes get an even better deal!

When purchasing something, I always check if it is available on the cashback websites. I use TopCashback and Quidco. It might not seem a lot, but over time the cashback builds up and becomes a nice sum of money that you can use for treats. You know what they say… look after the pennies and the pounds will look after themselves.

Another tip is to have different bank accounts for different purposes. For me, this makes it easier to see and manage the different pots.

For the tracking of my expenses I use apps on my phone like Yolt. But for our lovely Lucent clients, you can do this easily on your Personal Finance Portal (PFP). Using the Spending tab, you can link your bank and credit card accounts so that everything is in one place, and all of your spending is automatically categorised for you. Plus you can see how your other pensions and investments are doing while you are there. If you haven’t tried it yet, or are a little unsure, don’t hesitate to call the office and we will be happy to talk you through it, or send you some additional information that may help.

That’s it for now – happy budgeting – and I’ll see you in our next article.

If you have any questions on this topic, or if there is a financial matter that you would like to know more about, please feel free to contact us on the usual details – 0121 705 1000 / info@lucentfinancialplanning.co.uk.