Welcome to week 3 of the budget series!
This is where you allocate money to different “slices” of your budget-
Spending on the essentials
So what am I talking about? I’m talking about when you budget for “the essentials”. This includes all your household bills, mobile phones, cars, debt repayments, mortgage etc etc etc.
How often do you *really* look at your bills? Here’s a few questions for you to ask yourself.
- Do you make sure that you compare providers of your gas/electricity for example and switch every year to better deals?
- Do you upgrade to a new phone every time your contract ends?
- Are you leasing your car or own it outright?
- How many debts do you have?
I worked out this year, when on one of my annual “money dates” last January, that when my student loan is paid off, and all my debts are paid off, I will be at least £1000 better off PER MONTH. That’s CRAZY!!! To say I nearly fell off my chair is an understatement.
Become hyper-aware of what you spend money on
I was not always this aware – I would quite happily sign up to anything and everything as recently as two years ago. When I turned 30 though, everything suddenly felt scary and confusing. I never seemed to have enough money, I had no savings WHATSOEVER, and I had amounted a very large pile of crappy debt.
Fastforward 2 years, and I am hyper-aware of my spending. I spend on things that will be helpful to my business and therefore my future. I tend not to spend out on things that have no intrinsic return back to me, and I budget money for “education”, “fun”, “giving”, “investing” and “saving” so I don’t feel guilty when I do. The biggest thing I learnt was that most successful, wealthy people DO NOT spend more than 50% of their income every month. They have extremely low bills, and/or have assets like rental property paying for their “toys”. In fact, some of them spend not even 20% of their income. I mean, for the majority of us….this is not currently do-able without some significant changes.
Until this realisation, I had been spending regularly 95%+ on the essentials of my budget. In fact, some months I spend more than 100% of my income, which meant I was running out of money BEFORE the end of the month, AND using credit cards. A recipe for DISASTER!!
The honest truth
So if you want to effectively give yourself a “pay-rise” WITHOUT the need for doing overtime or selling your soul, go through this checklist as a starting point to make sure that you have looked at all your bills. With each one, ask yourself is this a WANT or a NEED. Some compromises and changes have to be made while you are stabilising your financial foundations:
- be consumer debt free (no loans/credit cards)
- have an £500-£1000 emergency fund
- start putting at least £25 per month into an investment account such as a stocks and shares ISA in the form of an index tracker that IS NOT actively managed – build this up more with time
Once you have sorted out your debt and freed up more money, then you can reinstate some of the “wants” in your life (if you still want them by then of course”). Obviously its all a matter of priority, and if something really is a “need” in your eyes, then so be it. Just accept that your financial situation will take longer to be resolved.
If you fancy downloading a free copy of my essentials checklist for where you could find savings in your day to day spending, then feel free to do it here.
Areas you might want to start looking at
- Utility Bills
- Bank charges
Ok, so I’ve looked, now what?
After a thorough decluttering of your bills, how much have you found in savings per month? This money is now for:
- Throwing at your smallest debt and getting that paid off quicker
- Putting into a savings account for an emergency fund
- Starting an investment portfolio in a stock and shares ISA (or equivalent if you’re not in the UK) for retirement
- Saving up for that amazing trip of a lifetime or university or anything else you really want to do!
Where you put this money is up to you and depends entirely on what stage you’re at in sorting out your money. There are so many other things you could save on – I’m sure you can think of many more!
Now I’m not going to pretend (like certain newspaper stories) that swapping your “Hoxton-smashed avocado on toast” for the local café sausage and beans on a Sunday is going to get you out of debt, but the collective impact of being more frugal with your well-earned money IS. Don’t you think you deserve to have what YOU want. For inspiration, read this article about a young couple who have got themselves on the housing ladder. Its truly inspiring! (I’m sorry about it being from the sun!) You may feel that this is not possible for you, but if they could do it, why not you? I have faith in you!
What if I can’t find any extra money?
You won’t like the answers to this, because it means one of a few things:
- you’re so broke and in debt that bankruptcy or other kind of arrangement is your only way out – seek help immediately! Use National Debt Line right now!
- you didn’t look hard enough, so go back and do the exercise again
- you are spending waaaaay more than you can afford to, which may not be your fault in truth, especially with childcare being so expensive in the UK….. but unfortunately this means you need to take on another job or “side hustle”. Avon, Uber, cleaning, pizza delivery, parcel delivery, virtual assisting on the internet – whatever it takes. Remember you only need £25 per month to start an investment portfolio, or if in debt, you just need to pay off the smallest one, then you’ll have extra money to throw at debt number 2 and so on. My free e-book on paying off debt explains this in more detail. If you can make just £100 extra per month, you’ll have your emergency fund sorted within 1 year.
And if all else fails – SELL STUFF (just not your kids – that might not be legal).
You have it in you to DO WHAT IT TAKES! I believe in you!
Good luck, I can’t wait to see what you get up to! Remember to join the private facebook group!
P.S. Answer these in the comments below-
QUESTION 1: what is the biggest saving you found after going through this checklist, and how will you spend this saving?
QUESTION 2: What else have you found to save money on?
Learn how to invest! https://nikkiramskill.podia.com/investing