A budget is the cornerstone of personal financial planning, and you can always make yours work harder for you. Whether you need to keep tabs on your spending, plan for the future or save for a holiday, budgeting better will help your reach your financial goals faster. At Money Dashboard, our aim is to support you in that journey, so we're sharing our tips on managing money like a pro.
Collate your money in one place
When planning a budget, it's easy to get lost in a fog of complex spreadsheets and multiple bank accounts. An expert budget unites everything in one place, giving you a clear picture of what you can expect to find in your wallet each day. Your budgeting isn't just a snapshot it's a detailed analysis of your money matters. Above all, it will need to be thorough, specific and accurate. First, you will want to factor in typical monthly costs, such as your rent/mortgage, insurance, utilities, groceries, phone bills and travel.
Next, you should take into account the cost of large, one-off spends. This is where many budgets fail, as they tend to look at everyday spends across a month without taking into account these larger outgoings. They might include holidays, car repairs or special celebrations.
As well as noting your monthly income, factor in one-off windfalls such as gifts or bonuses. Considering them as additions to your savings, rather than money that can go out of your account as soon as it comes in, will help you plan for a rainy day. Once all this information is gathered, subtract the spending from the earnings to break down your yearly and monthly totals.
Analyse your finances
A good budget should turn a chaotic collection of spending and saving into manageable chunks, so you can analyse your finances at a glance. A basic analysis will involve:
- a spending breakdown by area (groceries, bills, hobbies etc)
- a spending breakdown by type (direct debit, cash withdrawal etc)
- a monthly cost for big, one-off spends (annual number divided by 12).
Money Dashboard makes this easy. Once you sign up, you can use our free, secure, read-only budgeting software to gather your details from every bill and account into a single place.
Next, label each income source and outgoing with a custom tag of your choice, and generate easy-to-understand visuals. The results will show the biggest drains on your finances.
Armed with a clear view of your finances, you can really get creative with a saving plan. Our Money Dashboard blog is filled with advice on everything from how to compare electricity prices to recycling your old mobile phone for cash. The most sensible way to approach identifying savings is to focus on one area at a time. A good plan of action, for example, might look something like this:
- research smart energy systems like Hive
- use Skype, rather than your phone, to make calls
- use price comparison tools.
- compare supermarket prices using MySupermarket
- switch to own-brand products
- plan your meals to avoid impulse buying.
- start a monthly maintenance checklist to avoid expensive problems surprising you
- walk short distances where possible
- car pool with local colleagues.
- transfer savings from low interest accounts to ISAs for the best value
- try peer-to-peer lending.
A carefully planned budget will give you a high-level overview on your monthly finances, as well as drilling down into the details. When you look back on your old figures, you might be surprised at how much you've saved.
Posted by Money Dashboard