It’s Money Week this week so let’s get right back to the basics of money – a budget. You can’t manage your money successfully without one. It’s a shame that so many people see it so negatively. One of the most common comments that I hear about making a budget, and the one thing that puts people off the idea of ever doing one, is that it is designed to make you stop spending money! But that is simply not true. A budget, at its simplest level, is about knowing how you spend money.
At the risk of teaching your granny to suck eggs this is pretty basic, but it is often the basics that trip us up when it comes to our money. I was talking recently with some Solicitors and we discovered that one had three gym memberships, because she had forgotten to cancel direct debits when she moved house, and another spent over £200 every month on coffee from a well-known coffee shop! Now the super-fit solicitor with three gyms was well impressed that she could cancel two memberships, stay fit and have more money to spend every month but the other, while surprised the figure was so high, was quite comfortable with his caffeine intake because he reckoned he earned enough to justify the expense!
The interesting thing here was that before I spoke to them they didn’t know about the multiple gym memberships or the expensive coffee habit. If fact they didn’t know an awful lot about how they spent their money every month – and in that they’re no different from the rest of us.
To start your budget keep an absolutely accurate note of everything you spend for a period of at least a month! The coffee on the way to work in the morning and the newspaper or magazine to read on the train, the sandwich and mars bar at lunchtime and the quick drink on the way home. Everything.
And be honest with yourself. You’re not doing this for me or your bank manager or your boss or your partner. And you’re not doing it because you are trying to figure out what bits you are going to have to cut out. You are doing it because the starting point in putting together a sensible budget, and hopefully avoiding debt, is to understand how you spend money.