This week I have a brilliant piece courtesy of UK Money Blogger Tuppenny! Budgeting is one of those necessary things that we all have to have something of a grip on. If you’re really struggling with saving and investing, then you absolutely must start here. Tuppenny has a fab guide on where you can find this money in your own spending, even if you think you can’t save any more – there is always something you can do!
I hope it helps you! Come on over to my free and private Facebook group to share your wins in how you have managed to save money.
Who Is Tuppenny?
I started life as a teenage single mum without tuppence to rub together and spent many years not much better off. Throughout my life I have at times, saved hard, spent too much, made mistakes and worked my way back out of them. On my blog tuppennysfireplace.com I talk about living the frugal life and saving enough to retire early. We are on track to retire within 2 years and I can’t wait!
How To Cut Your Budget When It’s Already Cut To The Bone
If you aren’t a frugal millionaire then you probably need a budget. But what happens when you’ve crunched your numbers and come up with a budget that doesn’t actually work? The numbers don’t add up to the sum of your income, usually because they are still too high?
I know I really struggled when I was a teenage single mum living on a low income. I had so many months where I had more month than money. Sound familiar?
First things first, you do need a budget. It needs to be written down and visible. Either on paper or on a spreadsheet. It needs to be based on what you *actually spend* and your bills.
The problem is when you create your budget but it doesn’t add up. You keep re-working the numbers hoping they might magically suddenly add up to enough to cover all your bills. You know you need to cut your budget but what to cut?
It’s stressful reviewing your budget and coming up with a negative number and worrying about how you’re going to manage. So let’s look at what you can cut from your budget to make ends meet.
Step One – What’s Your Budget?
First of all you need to make sure your budget is complete and correct. You need to know what your monthly bill commitments are and what you currently spend your money on. Gather the last couple of months bank and credit card statements and work through them to list out everyone you pay money to whether it’s a monthly contract, contactless payment or credit card payment.
You need to break your spending into 3 categories:- Basic Living Expenses, Debt Repayments and Discretionary spending.
Basic Living Expenses
List out your essential living expenses such as
- utility bills (essential but can be lowered through careful usage)
- childcare (if you need this in order to work)
Include food here as well as you do need to eat in order to live! However we are going to look at your food bill a little later as well. Essential living expenses are the absolute basics so does not include TV packages, mobile phone contracts etc.
Total your Basic living Expenses.
Now you need to add in the minimum payments you must make to the people you owe money to. This includes bank loans, car loans and any credit card debt. Right now we are looking at minimum payments because you need to get your numbers down. We can look at extra loan payments later.
Add your total minimum Debt Repayments to your Basic Living Expenses. This is your skeleton, bare bones budget below which you cannot go without defaulting on your debt.
If you can’t make your budget balance at this stage then you are going to need to cut your living expenses which may well mean your housing costs and/or your food bill. However you’ve still got to eat even if it is only rice and beans!
Deduct this bare bones budget from your total income. The remaining cash is what you have to spread across all of your discretionary spending. How much you have left at this stage will help you make the right decisions on what to spend it on. This may well be the time that you need to be bold and brave.
Step Two – Discretionary Spending
Look at everything else that you have been spending money on in the past couple of months. List out all your monthly contracts and what you spend your hard earned money on which may include:
- Mobile phone contract
- TV package
- Gym membership
- Beauty treatments
- Restaurant meals
- Take away meals
- Lunch at work
- New clothes
You may view some of these categories as essential, mobile phone for instance or your TV package. The questions you need to be asking yourself are “Can I afford it?” “Can I get a cheaper alternative?” “Do I need X more than Y?” After all, the money you have left after paying for your basic living expenses and minimum debt repayments only goes so far and possibly not as far as you want it to go.
I could easily tell you what to cut from the list above but it would be based on how I live my life and what my priorities are. This is where you need to look at what you consider essential must haves, nice to haves and luxury items.
Step Three – Your Budget, Your Decisions
To help you decide on what to cut here are some questions to consider:
Do you NEED your current package? Could you downgrade packages for a few months?
Have you been going regularly for the past year? Has this helped you keep your weight and fitness at the right levels? If so,could you get a cheaper membership? Could you keep fit a cheaper way?
Are you making the most of your local beauty college? Could you reduce the frequency of your treatments? Do you NEED all the treatments you have?
I’ll be honest, if you need to cut your budget then this is one area that absolutely can and perhaps should be cut as an easy win. The amount you pay for a restaurant meal compared to what you can cook at home is huge. But, it’s your decision, you must be comfortable with what you cut from your budget.
Take Away Meals
Again an easy win can be made here to balance your budget especially if you were having a take away every week. You could cut this down or completely out depending on what other spending is important to you.
Lunch At Work
Buying lunch at work is just not something I do or would want to do. I take a packed lunch to work and have done for a very long time. Packed lunches cost a lot less than a £5 a day so you can definitely save money here.
However you might have a subsidised canteen where you get a decent cooked meal for £2 which might make it more sensible to buy that and have a cheaper meal at home in the evening.
Be really honest with yourself about buying new clothes. Do you really NEED any new clothes right now? Or even in 6 months time? These days clothes rarely wear out, they are more likely to get thrown out just because you’ve become bored of them. Having a new clothes shopping ban might help keep your spending down in this area.
Step Four – What Else Can You Do?
Creating a bare bones budget might not be enough. You might need to look at changing your relationship with money to ensure you can cut down. You know yourself best but some or all of the following will help you cut your spending and your budget.
Whenever I need to get back on track with my budget I use the cash envelope system. This is where you draw out enough cash and place it into separate envelopes and only spend what is in those envelopes. I have envelopes for grocery shopping, personal spending money and household bits. Once I’ve spent it I cannot spend any more.
It is easier to stay on budget with cash than using debit cards. There is something about having to physically hand over your hard earned cash that makes you reluctant to do so. Try it!
Lower Your Food Bill
I’m not saying you must go on a rice and beans diet but I bet you could save money on your grocery bill if you have to. Drop down a brand, cut down on snack items, stop buying convenience food. Don’t pay for someone to cut up your food and wrap it in daily portions (e.g. cheese) – buy the large packets, cut and wrap it yourself.
Reduce Your Utility Bills
Be more mindful about the energy you are using. Make sure you switch off lights when you leave a room. Wear an extra layer of clothing instead of turning the thermostat up. Reduce the thermostat more in the evening or overnight. Only wash clothes when you have a full wash. Turn off the shower whilst you soap up.
Each of these will reduce your utility bills by pennies but add them all up and you can save a couple of hundred pounds a year. Not to be sniffed at!
Increase Your Income
If you don’t make enough money then look at ways to earn more money. There are a million and one ways to earn a few pounds or hundreds every month. Yes, you’ll have less time but time is what you have, money is what you need. Use your time to make money. Do surveys, deliver pizza, wait on tables, whatever you can do to earn more money.
Save Money, Cut Your Budget
Cutting your budget when you have more month than money can be hard but it can be done. You need to be bold, brave and make the right decisions for you, your family and your money. You can save a lot of money by cutting down and looking after the pennies. Make the right decisions today and make your budget work – good luck!
Wow!! What a comprehensive list of ideas on how you can find extra money to get you through the month. It does take some hard choices, but if you know it’s only temporary, you’ll be more likely to stick to your new habits. Often it comes down to breaking out of a comfort zone that we have built up over the years. We get stuck in a cycle of spending every little bit we own, but this doesn’t help us in the long run. If we want to retire well, we need to be putting money into retirement savings and investments while we’re young enough to do it. Living frugally and avoiding spending creep is how we can break free of this pattern and help ourselves live a better future.
Good Luck in what you do, and don’t forget to join our community!
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