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Budgeting is a really important part of our family finances. Knowing what we have commitment wise is a really important step to staying calm and level headed while working as a self-employed person with a variable income and variable expenses!
While I don’t budget every single penny of our spending having a budget prepared, to refer back to each month, is a fantastic help financially and makes sure that no bills are ever forgotten either.
For me, a pound saved is the same as a pound earned. Really, as a UK taxpayer, I need to earn more than £1 to actually have one pound! This is why I plan for family finances, track our spending and do what I can to save money.
When our car went for its MOT I knew that we had money saved in our sinking funds. If our cat has to take a trip to the vet for an emergency I know we’ve got money saved towards this too. It might not always be enough but it is a big help!
Knowing how to prepare a budget is only part of the battle really. While I’m going to talk you through the basic steps you need to think about why it is you want or need to budget.
Do you want to have more available money? Are you looking to save money? Do you want enough money in your family finances to have another baby? There should be motivation there, even if it is just to have more money. Who doesn’t want more money right?!
Record all of your income
The first thing you want to do is record down all of your income. Look at your take-home pay, after any tax, national insurance, pension or other deductions. Don’t forget to include any income from dividends, savings or other sources.
Track your spending and record all outgoings
Look through a full year of your bank account if you can to track your spending. Categorise ALL of your spends into sections such as regular monthly payments, essentials like gas & electricity and your rent or mortgage.
Make sure you’re aware of all direct debits and standing orders. Look at areas where you regularly spend money on things such as haircuts, takeaways, family days out etc. By calculating a full year of spending you can get a realistic overview of the money that your family requires. Assuming that you don’t want to change your lifestyle much.
Make sure you check your credit card statement and places like Paypal too.
Start your budget
The basic gist is once you know your income and your outgoings you can work on your budget. You can set aside monthly amounts for pots/sinking funds such as Halloween, Christmas, Children’s Birthdays and more. This is a great way to save throughout the year, without then being burdened in busy months, or in December when you KNOW Christmas comes around every year!
By writing down your budgeted amounts you will be able to make savings on a monthly or weekly basis to fill up your pots. Once you have budgeted for all areas of your life then you know how much money you have left for additional saving, debt repayments or just spending on dream purchases.
Think about special occasions and annual occurrences
When you’re looking at your outgoings be sure you budget for annual events, such as an MOT or service on your car, and any Birthdays or special occasions.
If you like to buy Halloween decorations or new Christmas tree ornaments, then build this into your budget. Stop being surprised when Christmas comes around by saving a small amount throughout the year.
If you save from January to November for Christmas then you’ll have the money available in early December to start your shopping and stock up on food and other goodies.
Change your habits
Looking at a whole year of spending can make you feel a little queasy – I know it does me most years! Perhaps you’re spending a mortgage payment annually on takeaways. Maybe you’ve realised that your love of fast fashion is costing you a small fortune and absolutely HAS to stop.
Now that you’re aware of your spending you can begin to change your habits. Look at ways to save money on takeaways or discover the joys of the charity shop. Can you use shopping apps to save on groceries or maybe you can save money on fruit & vegetables.
Make savings automatic
If you want to start building up your savings then you can save a set amount per month or week to help you hit your annual savings goals.
You can consider looking at an automatic savings apps. I love to use *Plum in particular! They have free options and use AI to automatically transfer money to help you hit your savings goals with ease.
Why not start one of these money saving challenges? A savings challenge can be a great way to start making small steps towards building better savings habits – you could even look to pay off debt and become debt free or start investing with the money that you save!
Earn extra money to boost your finances
Now you know how to prepare a budget why not check out some of my other money saving and money making posts?
Are you preparing financially for Christmas?
There is never a better time to start saving for Christmas than right now! Check out my favourite ways to make and save money to kickstart your Christmas finances.
I hope you’ve found this post on how to prepare a budget useful! I’ve got lots of great content planned for this year and can’t wait to share it all with you.