The United Kingdom has a money problem. In 2015, PwC projected that average UK households would owe close to £10,000 in debts by the end of 2016. If things got out of hand for you last year, then it is time to do some serious budgeting.
Brace yourself. Budgeting will push you to look at ugly things. You might get shocked after seeing the true state of your finances. But consider the process as an eye-opener. Remember that it is through changing your mindset and adjusting your lifestyle that you will achieve its benefits.
Here are six budgeting tips to get you started:
It's not that complicated
Budgeting may seem burdensome for some people. The elephant brain just wants to stay out of it because it is not a pleasurable experience. The fear of finding out that you are overspending or deep in debt may also have a role to play. But when you let the executive brain take over, you may find that it is quite a simple exercise. It is simple in the sense that you do not need to deal with extraneous data. All that's required to start are the following: your personal or household's sources of income, expenses (fixed and variable), and liabilities.
Use free apps and services
If you hate technicalities, let technology do the job for you. Sign up for an account with web-based or digital money managers. Try multiple free versions before committing to a premium plan.
Set objectives as well, so you know what features to search. For instance, find your incomings and outgoings in one place with Money Dashboard. The iOS/Android app also lets you monitor monthly spending, set spending limits, and tag your purchases by category. Goodbudget is another great service. It allows you to "organise your finances into envelopes based on weekly, monthly, or time-based expenditure."
Manage receipts for reimbursement
This tip is for employees who are entitled to reimbursements. Business expenses, such as travel, accommodation, and overseas trip expenses, are classified as variable costs. They get deducted them from your current balance and carried over as future receivables.
There are apps for keeping digital receipts in one place. Some even let you take a photo of actual receipts and convert them into digital format. You can also apply this method to monitor your daily expenditure. At the end of the month, you can do your calculations, adjust next month's projections, and replenish your petty cash.
Use a disciplined approach towards shopping
When in doubt, don't buy stuff. Many can attest to this, though: it is not as easy as it sounds. But if you despise budgeting, you should take the saying seriously. Why? You are running the risk of overspending here. And overspending can lead to accumulating liabilities, especially if you have nothing to offset the debt.
One way to control your impulse is to forgo the decision making by a month. According to the 30-day rule, your desire for that shiny new toy or fancy appliance will have waned after 30 days. You will have also made a smarter choice for your finances.
Focus on debt repayment
High-interest debt can eat up your budget easily. If you are able to pay beyond the minimum after taking care of the essentials, then do so. According to financial blogger David Weliver, "Paying down debt is a form of savings. The faster you pay off your debt, the more you save in interest charges."
Go for a one-week budgeting trial
Do the tactics above sound overwhelming? If your answer is yes, try the one-week trick. For 7 days, work on applying each tip. Track expenses, collect receipts, delay instant gratification, and repay the debt with the highest interest rate within this short period. If you fail during your first try, do it again next week. Keep practising until you conquer an entire week. Your success will give you a feeling of satisfaction, which you can look forward to having over and over again.