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| Picture From http://farm7.staticflickr.com /6059/5915295831_8ef7f83c6f_z.jpg |
Why is it really important? Well it determines whether you will have enough money to eat, pay bills, travel and most importantly live well.
Too many people make the mistake of living in one big cycle. Pay in one hand and pay out of the other hand. A well known phrase 'in one hand and out of the other'.
Well it doesn't have to be this way. Whether you are unemployed, earning minimum wage, only have a part time job or in some cases earning a very good salary but still don't have enough money for a meal out come payday!
Living well is too expensive, many say. But it doesn't have to be if you budget well, get organised and take pride in what you do with your money.
I have been unemployed, worked minimum wage, worked part time and also earned a very generous salary. My past money issues / non issues have gave me the will and the know how, of how to manage money, whether its next to nothing or earning a really good salary.
Unfortunately I can't say I have had millions of pounds in the bank and I know how to budget with that amount of money, but maybe one day I will be able too. (figures crossed whilst typing) ha ha.
Right so lets move on and delve a little more into the subject at hand.
Let's look into the 'living within our means' shall we;
Throughout the world a lot of us try to live beyond our means, and by this I mean living in finance, debt above our heads, and wanting things that can or will financially cripple us.
In this case, the trick is not to go into a financing situation or a loan situation, try to stay debt free as possible. No brainer right?
Well it may sound simple and straight forward but in fact over 9 million people (UK alone) are in serious debt... YES, over 9 MILLION PEOPLE!!!
The link to this is here; http://www.bbc.co.uk/news/business-25108891
So as simple as it may sound 'try to stay debt free' in fact the statistics show that it isn't all that simple.
Via the above link, it states a lady only took a loan out for £2000, but she was unable to keep up the payment and before she knew it, she found herself struggling and under severe pressures to pay all her bills, and pay off the money she owed.
I am not going to advise you to never go into a finance / loan agreement etc. I am simply saying make sure you can afford it, and make sure it's something you really need!
But with finance / loans in mind, I will be covering how to avoid going into the cycle of 'pay in one hand, pay out the other' and also ways of avoiding finance / loans all together.
So where do we start? We start with the money you have now. Not potential money i.e. 'You should get a pay rise in a month or two', not 'I am guaranteed a job in a month' etc.
The money you live on now. Current salary, current benefits etc. Along with your current outgoings, yes the dreaded outgoings!
It's straight forward really and it will only take you around half an hour to an hour to do, but this half an hour or hour could be the best hours paid job you have ever done.
Below is a basic budget summery that anyone can do. You should however make it easy to read for yourself, as there's no point setting it all out and you cant understand it, or it becomes a chore to look at every month.
Also adjust the outgoings and your money in to your relative situation. I.e you may need to swap salary to income support, or you don't have Child tax credit etc. So adjust accordingly.
01/01/15
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01/02/15
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MONEY IN;
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MONEY OUT;
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YEARLY COSTS;
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Salary;
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£1,200.00
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Mortgage £550
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Car MOT £200
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Child Tax
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£200.00
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Car Insurance £60
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Car Tax £140
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Family Tax
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£40.00
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Food Shop £300
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Christmas £600
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Working Tax
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£200.00
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Council Tax £100
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Birthdays £200
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Gas/Electric £160
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Fuel £50
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TOTAL IN;
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£1,640.00
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TOTAL OUT;
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£1,220.00
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TOTAL; £1140.00
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£1,140.00
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Divided By
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12 Months
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Equals
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£95.00 Per month
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£95+£1140
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Equals
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£1235.00 Per month
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TOTAL IN;
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£1,640.00
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TOTAL OUT;
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£1,235.00
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LEAVES; £405.00 Per month
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Above please take notice of the yearly costs that we all encounter. Christmas, birthdays etc. as they can disrupt your budget for the whole year if forgot about. Many people forget the yearly costs and then wonder why they had to take a loan out to cover the costs.
The method I use is shown above. Let's use the Christmas cost for example.
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| Picture From http://www.gonrieux.be/wp-content/ uploads/2012/12/christmas-tree.jpg |
Many people use 11 months but I still count the full 12 personally, as if you budget the right way, come December you will have your yearly savings for Christmas and still be able to put away your monthly budget cost.
Above are all estimates and are used for illustration purposes only, so as mentioned previously, adjust accordingly to suit your personal circumstances.
Please note that should you wish to go on holiday, remember to put it in the budget, and also add spending money!
Above shows that we are left with £405.00 every month after ALL costs / outgoings. It is important that you stay within this limit each month, no matter how much you want that new sofa, car etc.
Should you wish to buy a new sofa, a whole new wardrobe, a new car etc. Remember to budget for it. Save what you can from your disposable funds of £405.00 per month until you can buy the item / product outright with cash.
With the basic budget drawn out, lets have a look at staying out of 'loans / finance' etc.
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| Picture From http://www.recologysouthvalley.com /images/RecologySouthValley/old_sofa.jpg |
Within this topic we will use the budgeting table as our guide / reference to simplify things.
So you have had enough of sitting on the old sofa that has done you service for the past five / ten years and would love a new sofa?
It would be so easy to walk into a shop and get a brand new sofa on finance wouldn't it? With free delivery as well and a guarantee etc. etc. DON'T DO IT!
The sofa that you like is right in front of you for £1000, but you don't have to pay anything upfront and the monthly repayments are only 'X' amount per month....
OK, well that sofa is only 'X' amount a month, with nothing to pay upfront can financially cripple you.
A sofa that is worth £1000 'CASH' will cost you around £1800 just for the 'FINANCE' option. Nearly double the 'CASH PRICE'. Forget it.
Look at your budget and think, I have £405.00 per month left after all my costs. Well if I save £200 per month I can have it within five months.
OK so it's 5 months, but there are many ways to look at this.
Firstly; it may take you five months or even more to get the sofa but when you walk in to purchase the sofa, it is then yours. No one else's, YOURS!
Secondly; It may take you five months, but it will take you even longer to pay the finance off, and you will have the debt of the sofa hanging over you like a dark cloud that's ready to empty on you. Putting it nicely.
Thirdly; It may look dated by 5 months. Well who changes their sofa every 5 months? If you do, then your budget will be considerably more desirable and therefore you wont need to only budget for £200 per month.
Fourthly; Think ahead. Think to yourself 'would I like a new sofa come autumn / summer' etc.
Then you can budget for your new sofa before you even go shopping around for one. Also by then you will have enough money to pay for the sofa with cash and own the sofa outright.
So, with all the above mentioned you will now be saving £800 just for avoiding 'the privilege of finance' along with saving yourself the dark cloud that could of hung over you for a considerable amount of time.
This example is again just an example, but the above thought process can be adopted to buying a newer car, a new computer etc. etc.
I hope the above helps and is understood as I believe a happy budget is a happy life, even if you are left with only £20 per month left. At least we all know where our money is spent, and if you require something new, that by budgeting for things we 'DO SAVE MONEY' overall.
I will also be covering how to cut costs, how to budget for our monthly food shop, investing your money and much more.
Please feel free to comment / get involved and I am always happy to receive an e-mail, message, tweet etc. etc.
Have fun people!!!! Remember 'Saving money should be fun, not a chore'.
The above topic will also be covered within my audio and eBook series 'JLlewellyn's Family Life' which will be available from December 2015 onwards.
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