How To Budget, Part 2
Getting Into The Habit Of Being Thrifty
Tartan Thrifty is all about getting into the habit of spending less without living less well. Some habits need to be carried out every day, some every week. Some only need to be carried out once a month – and, surprise, surprise, they are the hardest ones to keep up. To help with that you can find a wall-planner to help you keep on top of this week’s Thrifty Habits – the dailies, the weeklies and the ones that only come round once a month – here. Use it to plan when exactly you are going to carry out the Weekly and Monthly Habits.
Thrifty Things To Do This Week
It’s the final week of the month – time to Make A Budget for next month and to Share Something. Last month I wrote about how to clarify your values before you even start deciding how to spend your money. This month it’s time to look at how to go about drawing up your budget.
Last year I had a moment of clarity while watching Downton Abbey… I realised that you don’t need fancy tech to help you manage your budget: you need honesty. Honesty and simple arithmetic are the keys that let you lock down your budget.
The arithmetic part is easiest – add up what you need to spend, subtract it from what you have to spend and, if there is anything left over, spend it on what you want to buy. Simple. The honesty part is trickier – we all struggle to work with the real sometimes. But it is important to train yourself to be honest because, if you don’t, your finances will spiral out of control, leaving you wondering where you went wrong.
How To Write An Honest Budget
- Work out exactly how much you have to spend this month – don’t settle for a ballpark figure or an optomistic guess!
- Make two lists: a list of all the things you want to spend money on and a list of all the things you need to spend money on. Be honest about how necessary each item on this list is. Does it fit with your values? Does it have to be paid this month or can it wait? Will there be dire consequences (like having no food, or your electricity being cut off, or your credit rating plummeting) if you don’t pay it? Push yourself to be honest about the difference between needing and wanting to spend money. When you are done, look again at your values and check there is nothing that matters to you missing from either of your lists.
- Now try to get as accurate a figure as you can of how much each item on each list will cost you. Add up the Needs. Subtract the total cost of your Needs from the amount you have to spend this month. If you have enough to pay for your Needs – breathe a sigh of relief. If you have more than enough to cover your Needs – do a little dance to celebrate because that means you can also spend on some of the things on your Want list. Don’t have enough to cover your Needs? Well…
What To Do When The Numbers Don’t Add Up
First of all, congratulate yourself – you have found out now, before you spent anything, rather than at the end of the month when you have already overspent. You are ahead of the game. Don’t waste that by burying your head in the sand and telling yourself it will all work out somehow. Go back to your Needs list and start shopping around to see if you can get anything on that list for less. For example, could you get a cheaper tariff from your energy supplier? Could you reduce your supermarket spend by shopping in a cheaper supermarket or buying only own-brand? Could you take the kids on free outings this month instead of spending on softplay/cinema trips/etc.? Will second hand or borrowed do for some items on your list?
If that’s not enough to bring your Needs in line with your income, prioritise your list – what items are most urgent? Shift anything that does not have to be paid this month to the top of your Wants list.
If that still doesn’t bring your Needs in line with your income, consider adjusting your income – can you sell anything on Ebay or at a car boot sale to raise a little extra money? Have you got savings you can dip into this month? Does anyone owe you money?
What To Do When Drawing Up A Budget Seems Too Miserable An Experience
I have been there, and I know the stomach-churning feeling of seeing how little of your Needs will be covered by your income. But I also know that facing up to that, honestly, is the first step towards changing it. Do your budget in short, 15 minute bursts if that is all you can bear. Stick on music, do it in the advert breaks of your favourite show, promise yourself a (cheap!) treat at the end of it. Do whatever it takes to get it done – but do get it done.