Are you living from paycheck to paycheck? Always running out of money at the end of the month? Then it’s time to take control of your household finances. With a bit of careful budgeting – and a lot of self-discipline – you can get your finances back on an even keel, pay off all your debts, and start saving for the future.
The first thing you should do is to set out some goals. What these are depends entirely on your situation. If you are in debt, then paying this off should be your first priority. Debt can be a serious drain on your finances, and if you let it get out of hand, you could end up in deep financial trouble. If you have debts outstanding, the interest alone becomes a monthly outgoing that could be put to much better use. You may also have other goals, such as saving for a deposit on your first home or for your child’s education. You should also try to put some money aside for emergencies, so that a sudden expense or drop in income will not inevitably lead to a financial meltdown. Take the time to write out these goals as specifically as you can, with a projected time frame for each one.
Next, you need to start keeping tabs on your outgoings. Being unaware of exactly what you spend your money on every month is a recipe for disaster. Keep a written record of everything that you spend money on for at least a month, as this will help you to form a clearer picture of where your money is going and help to identify problem areas.
Once you have a clear picture of your outgoings and have identified your savings goals, it is time to set out a budget. This is basically a plan for how you intend to spend your money each month. Start off by writing down your fixed expenses, such as rent, insurance, utilities, and car payments. It might be the case that you can reduce these costs by, for example, switching your insurance and utilities to cheaper providers or moving to a cheaper property, but it is unlikely that you will be able to do this straight away. Next, dive into your spending log to create a list of your other expenses such as groceries and entertainment. In most cases, it is these things that you will have to cut back on.
While it is possible to budget effectively using nothing but pen and paper, you may find it easier to use dedicated free budget planner software such as Money Dashboard. This can help to streamline the whole process, making it easier to keep track of and manage your household finances, and presenting the information in a way that is easier to comprehend, with visual aids such as graphs and charts.
In the case of groceries, you can often save a bit of money by switching to cheaper brands or shops. If you buy a lot of ready meals, you may be surprised to find out how much cheaper it is to make your own meals from raw ingredients. As a rule, vegetables are a lot cheaper than meat, so you can save a lot of money by cutting down on meat or even adopting a meat-free diet. If you smoke tobacco or drink alcohol, you can save a huge amount of money by cutting down or giving up, as both of these are subject to heavy taxation.
Cutting back on your expenditure should leave you with a bit of cash left over each month. If this is not the case, then you may need to cut back on your spending even more aggressively and/or find a way to increase your income. You can then use this ‘spare’ cash to pay down your debts, or if you are debt-free, to put towards your savings goals.