There was a period in my life when money was ultimately scarce. I mean I had just resigned from my full time job and made a decision to volunteer full time for 6 months in a sector I was trying to break into because I did not have any previous work experience to support building a career in that sector. I gave in my notice at work, gave my notice at my rented accommodation and started on this new journey.
Luckily, the voluntary role included accommodation so I had a roof over my head and did not have to worry about accommodation cost. However, because I was given only a specific amount each month just to cover my feeding and travel expenses, it meant my standard of living was low. I had no savings. Could barely save from the little token I was given because it just about helped to cover some fixed expenses and some previous debts. That only worked because my budget for food was next to nothing. Even in the process, I incurred more debt through borrowing in order to meet up with some unforeseen medical emergency.
It is good to budget and save.
It was during this period, I truly learnt the value in saving and budgeting. Prior to this time, looking back I could say I was careless when it came to money. I did not understand the value of money. I was not a lazy person because I always did work; started working since I was 16 and I have had the opportunity of making some good money for what it was worth in my early days, but because I did not know what to do with the money, I squandered it. My lifestyle was extravagant. I liked comfort. If I wanted something, I would go out and get it. I favoured taxis over public transport. On nights out with friends, I wasn’t dependent on guys for drinks like some of the girls. I bought my drinks and frequented the bar unconstrained.
I had money. I made money. But wasted it all immensely. I walked around with approximately a minimum of £100 per day and kept visiting the cash point as often as I needed to top up. Lived on takeaways; treated myself to whatever meal I fancied any given time. I would be on the queue of one of the first persons to buy the latest gadgets even if I didn’t need it. I spent, spent, spent. In some ways, you could say I was a little spoilt.
I did not know how to manage money because I don’t believe anyone really sat down to talk to me about it, and if they did, I did not hear them, I just did my own thing. I was so bad with money to the point that even though I was earning a reasonable amount for my age at the time, I still had the audacity to ask my parents for money when I had completely overspent in the name of comfort, which were mere luxuries. I remember an instant when I overspent to the point that I spent the money intended for my rent that my mother had to bail me out. However, that changed when she forced me to grow up and I was left to finance myself completely in certain areas.
Even with that, I didn’t learn the art of budgeting and saving. I instead just cultivated the habit of borrowing and borrowing; piling up debts upon debts that were ultimately pulling me back instead of pushing me forward to the possible future I could have had. In retrospection, I realised that I had been quite fortunate but did not appreciate or maximise the opportunities and potentials I had because I did not understand what financial planning for the future meant and how to go about it.
Budgeting is important because it gives you maximum control over your finances, your lifestyle and your potential financial future. Budgeting, if done realistically, correctly, appropriately, monitored and evaluated frequently and effectively, anyone at any given time, no matter their financial status can look into their future and see where they would be in the next few years. In other words, you become your own fortune-teller. You would be able to predict when you will bask in excess and plan in advance when you see grim of lack looming in the corner.
I have heard this notion before: some people are afraid to budget due to the fear of the being confronted with the reality of their financial situation. I say to that, is it not better to come face to face with it, no matter how bad it is now, and put plans in place to make it better, than to continue the way you are for the next few years, either remaining in this same place and not becoming financial better? In most cases, becoming even worse off?
This article I do not imagine is for everyone because I imagine some people do budget and have it clearly mapped out somewhere, what they earn and what is going out and what they are saving. However, I aim this article at others who may struggle to budget and those who only carry out mental budgets, who do not record their budgets in any medium.
What I have found from personal experience is, when it is properly done and written down or stored electronically (I use Excel), I can plan for as many years as I deem fit and manipulate data as I wish. I find it easier to see clearly where my money is going, what would happen to my finance in the next few months, years if I do not make some changes if they are necessary etc. I do not think I would have achieved the same result as I have in the last 8 years with only a mental budget.
I think we can all agree that to get from A to B in this life, we need money. I need money. You need money. No one can argue with that. If that is the case and money is one of the vehicles to our success, then why not take time and invest in how we utilise and manage it?
There are so many articles, blogs, tips on budgeting out there, online and even from your bank, that are easily accessible if we look for it. I would like to recommend having a look at Money Saving Expert. They have great resources on everything pertaining to finance.
In the meantime, I will share some bits and bobs about the benefits of budgeting based on my personal experience and would mention briefly what to include in your budget. Here is trusting that you would do further research on your own. 😉
Some benefits of budgeting
- Help you to manage your finance better
- Give you a rough idea of your financial status
- Helps you to predict when you would have surplus cash flow and helps you plan in advance how to maximise it e.g. multiplying it through investment
- Helps you to predict when you could potentially be broke and helps you plan in advance how you can avoid it
- Motivates and increases your confidence towards achieving your goals – whatever that may be. For example, having enough money to start your own business in a few years, buy a house, start a family etc.
- Helps you to save
- Helps you take charge of debts and plan responsibly to reduce them
- Improve your credit report because you are managing money better.
- Improves your overall quality of life because you are clear on the status of your finances and can now successfully live within your means, without so much stress.
What to include in a budget
I am not a financial advisor or money expert, but I say EVERYTHING, including that £2 Costa coffee you get on your way to work every morning. I say budget every penny because even the pennies add up over a period of time.
Examples of what I have included in my budgets in the last few years
I must confess that my budget changes as my priorities in life change, so these are not fixed but mere examples. You will have to do yours according to your need and circumstance.
- All income: It’s not enough that my budget just includes my salary only when I have other sources of income. Even if the additional income is just an extra £20 a month, include it. Ordinary extra £20 a month is an extra £240 a year, which could cover grocery shopping for at least 3 months. The point is, your budget should include all incomes because it would help you to make better judgement on how you distribute your money, and would help your cash flow in the long run.
- Fixed expenses e.g. mortgage/rent, utility bills, food, travel expense/car insurance, fixed loan repayment etc.
- Variable expenses e.g. telephone bills, credit card payments, etc.
- Saving: The general rule of thumb is to save 20% of your income. Now it’s understandable if per current circumstance one is unable to do that due to various commitments. However, I have come to appreciate that in such circumstance, cultivating the habit of saving is mostly important against the total amount saved at the end of the day. I’m of the opinion if you save little from your little; you would be able to save more when you get more. However the opposite would be the case if that habit is not developed, because when you have more, you would always find something to use it for instead of saving.
- Entertainment: I budget for this because realistically I do indulge in entertaining myself, so it is unrealistic for me not to include it as if this does not happen. It helped me in fact to be able to make quick decisions when a friend asked if I wanted to do something e.g. cinema, theatre, bar etc. In my mind, I already know what my budget is so if I can’t afford it, I can kindly decline or suggest something affordable. It worked.
- Personal allowance: Money I give to myself to use as I please on any little thing that I wanted, so this is where that morning Costa coffee come in. Also, because I like to read, my personal allowance also covers my books purchase and any little things I buy for my kids/husband as gifts. I found that doing this helps me keep to my budget because I am not simply restricted in my budget. I have money I can use for whatever I wanted, no question asked. The amount of personal allowance you give to yourself is circumstantial but I found it’s a good one to have.
- Financial aid fund: This is some money you can afford to put aside to help someone that may need your help. So I am imagining everyone has someone or some people somewhere who may need their help financially – even if it’s as a loan not to exactly give away. It helps to have something put aside for things such as this because when people do come and we want to help them, we won’t be completely destabilised.
- Any other financial commitments outside of the brackets I have mentioned e.g. what I call, ‘Giving back to the parents fund’, where you just give something to your parents, not because they may actually need it but just because you want to show appreciation to them for putting up with you all these years.
Naturally, some examples I have provided may not apply to everyone. The idea is to make your budget whatever it is to you. Let it include your everything. In that way you can get a good idea of your financial commitments and also shape your financial aim and goals as you deem fit.
There are loads of budget templates available online if you need help to get you started. Here is a printable budget planner obtained from Money Saving Expert. There are electronic ones also; you can have a look around – Google it. Excel has inbuilt templates too. Whichever best suits your need, go with that.
A little something extra
Like I have previously said, I am not a financial advisor, I am only stating my opinions based on personal experience. However, because I have been a budget addict these past few years, I have become quite good at it and also at creating my own customised budget sheet using Excel, where I design it to fit my purpose. I do not just include figures, I use some of Excel inbuilt features and functions to monitor my progress. For example, if I want to know if at any point I would be in deficit, I use conditional formatting to highlight this in red based on whatever condition I set. Therefore, as I am budgeting and adjusting figures, I can see clearly and at ample time if the decision I am about to make is a bad one, so I can make amends asap.
Having said that, I would like to offer to assist the first 3 people to comment and who require the support to do a personalised budget sheet.
Please note: I am not providing a service, just merely assisting. I would not be interested in anyone’s account details; I would not want to see anyone’s financial records. I will just help create a personalised budget sheet based on what information you will like it to include and what you will like to monitor e.g. flag up in your budget, if anything. Then you can enter the figures yourself when I email the Excel document back to you. All communication would be via email.
If you are interested in this support, please comment and include ‘Help me with this’ in your comment, and I will support the first 3 people who does this. I will send an email to each respective person to start of.
BTW: If you are a member of my family or a close friend reading this, this support would not apply to you. You have my number, call me 😛
Thanks for reading. Please leave a comment, let’s discuss.
You can also email me: firstname.lastname@example.org
Have a fab day.