Too many people are no good at budgeting
New research shows that at least 40% of Brits could improve their budgeting skills.
If you want to make the most of your money, budgeting is crucial. However, new research from thinkmoney suggests that many folk either aren’t budgeting at all or doing a rotten job of sticking to their spending plans.
The research looks at whether people spend differently over the course of the month. In other words, do we spend sensibly at the same rate throughout the month or do we blow our pay in the first week or so and then suffer until the next pay day comes around? (The research assumes that we’re all paid at the beginning of the month.)
Look at these figures:
- 20 million people put off any non-essential spending in the second half of the month. That’s 42% of current account holders.
- 13 million people live off the food they already have in their fridge/freezer or cupboards.
- 1.9 million people slip into the red on the first day of the month.
So it looks like at least 40% of people aren’t spreading out their spending evenly through the month. That suggests they're budgeting badly or don't have a spending budget at all.
Now if you haven’t got much money, we admit it can be hard to stay in the black right until payday. But every time you go into the red you’ll probably have to pay interest on your debt – often around 19% a year – and you may have to pay a penalty fee as well.
What’s more, life isn’t much fun if you spend the second half of the month fretting about money. So it's worth making a big effort to really budget effectively.
No magic wand
Granted, if you’re only able to go out twice a month, budgeting isn’t going to suddenly mean you can go out twice a week. We don’t have a magic wand to solve all your financial problems. But surely it’s better to spread out your treats through the course of the month rather than bunching them in one week at the beginning?
And anyway, if you budget effectively, you may find that you spot areas where you could cut back and so have a bit more cash for treats each month.
Draw up your budget
If you don’t already have a budget, you can find out how to start one in Set a budget and stick to it.
And even if you already have a budget, you may be able to improve it.
Do you include all your spending items in your budget, right down to the smallest things? If your budget isn’t comprehensive, you may miss some areas where you could cut back without too much pain. With the money you save, you might be able to pay for an extra treat towards the end of the month.
Sticking to it
Drawing up a budget is an important first step but then you’ve got to make sure you stick to that budget. That’s where Lovemoney’s MoneyTrack tool comes in. You can set budget goals with the tool and then check to see whether you’re sticking with those goals every day.
MoneyTrack enables you to see all your card spending on one page – even if you have five credit cards and two debit cards, you’ll still see all your transactions on one page. The tool also automatically puts your spending into categories such as ‘Clothes/accessories’ or ‘Eating out, pubs & takeaways'.
Unnecessary spending
If you budget, you’re more likely to systematically plan your spending and make sure that you get the cheapest option every time. So you’ll compare your energy supplier every year and you’ll use cashback sites to get a lower price when you shop online.
With an accurate budget and some prudent spending cuts, you’ll hopefully be able to spread your spending evenly through the month. No more baked beans on toast for three consecutive nights before payday!
- Check out MoneyTrack
More from Lovemoney:
Top ten ways to make £18 in 30 minutes
Five ways to increase your income
Comments
Be the first to comment
Do you want to comment on this article? You need to be signed in for this feature