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How often do you find yourself reaching payday with nothing left, dipping into your overdraft or putting everyday items onto credit cards? Too often? Then it’s time to take control of your spending!
There was a time when my wages would hit my bank account each month and not even clear my overdraft, and it just kept on growing each month. Every month I would tell myself it would be different this time, and I would try and reign in my spending, but time and time again I would find myself out of pocket, and just digging myself deeper and deeper into debt.
And it’s one thing if you are a lavish spender and know you have a habit of treating yourself to things you don’t really need, but I can’t even say that was my problem, being a bit of a hippy at heart, I have always been a bit of a reduce, reuse, recycle kinda gal, I don’t really splurge on clothes, and what I do buy I get from charity shops. I don’t like waste, so I try to avoid making unnecessary purchases, but still somehow managed to find myself in financial difficulties every single month. How are you supposed to stop spending, when everything you buy is actually needed? Just where does all that money go??!
Track your spending
If you want to make changes to how you manage your money, start here first. Don’t even jump in trying to save money straight away, just spend as you normally would for one entire month, noting down every single little thing you buy over that period and how much it cost.
I can’t tell you how much attention this received from friends when I first started doing this…I had a notebook in my bag that I would whip out and write down every item I bought as I bought it. (Tip…This is important! At one point I tried making it part of an evening ritual and wrote it all down at the end of the day, but would invariably forget things, even if I kept the receipts, sometimes I would lose one… So I found it really did just work better when I did it as I went.) “Wow, you’re so organised!”, “Oh my god, you’re such a nerd!” or “Seriously? You’re even writing down that? (insert tiny, seemingly insignificant purchase here)” were standard comments every time I went anywhere with anyone.
Burst that bubble!
Tracking your spending is great for 2 reasons. First and foremost, it will totally burst your “but I’m really not a big spender” bubble. If you have never done this and are guestimating how much you need per month I can pretty much guarantee you are spending waaaaaay more than you realise. Second, knowing you are going to have to write a purchase down really makes you think about whether or not you really need this in your life, holding you accountable to your goals.
Techy or tactile?
There are loads of apps available for this purpose, which have the added advantage over pen and paper of calculating your spending and also categorising so you can see exactly where your money is going, and what areas you need to tighten your belt in /revisit your budget (more on budgeting later). If like me you perhaps find it hard to resist buying, ahem, yet another pretty notebook, and have amassed a bit of a stash, then feel free to utilise one of those… At least you can alleviate the guilt of that particular purchase!
But seriously, on the subject of feeling guilty, don’t. This isn’t an exercise in berating yourself over your spending. The purpose of this month of money tracking is to be totally honest with yourself, without assessing, without questioning, just to build a realistic picture of how much money you are REALLY spending, and whether or not this is all essential. So don’t overthink it, just do it! It really is an eye-opener, and something I wish I had done a lot sooner.
So, having spent one month meticulously recording your outgoings, compare this to what you imagined you were spending. Pretty different? Then you need to regain control of how you spend your money with a budget.
Write down all your non-negotiable fixed expenses, like bills or rent/mortgage, and divide whatever money you have left over between everything else.
Related reading: Kakeibo – the Japanese Budgeting Journal
Create categories for anything that you know you will be doing regularly or may need such as:
- Sports, hobbies and social,
- School dinners
- Transport/fuel etc…
Then create a few more for things that you don’t necessarily make allowance for because they don’t happen monthly, like building up a bit of a fund to cover your car MOT, or putting aside a bit each month into a ‘festive fund’ for birthdays, Christmas or other celebrations. This way you won’t be caught out and have to find the cash in a hurry. I also strongly believe that you should have a category just for savings, and make sure you pay into it each month.
Split your money between these categories and don’t allow yourself to spend over this. Live within your means but be realistic. If you logged that during a typical month you spent an average of £150 a week on food, then don’t try and budget £80, because you won’t stick to it.
If you know that you were buying too much, and wasted a lot of that food, then that is an area you could look to make a saving. Try making a meal plan and only buying exactly what you need, and avoid buying tempting but needless add-ons!
Be honest about your spending and don’t try and cut your budget in half straight away. You’ll only feel deprived and resentful. Budgeting doesn’t mean going without and can be a really positive tool which leaves you feeling on top of your money game… but only if you do it right!
Work out what is important to you, and decide how much you are comfortable budgeting. If you are a real foodie, but not so bothered about fashion, then allow yourself a food allowance that means you get to treat yourself a little, but maybe don’t put so much aside for clothing.
If you love working out and taking fitness classes but don’t drive, then you aren’t going to need to budget for fuel and can go ahead and take that extra pilates class. Even better, take advantage of the excellent free fitness videos on youtube, and put the extra straight into your savings!
Cash, cash, cash
As soon as you have your monthly budget figured out, work out what needs to stay in your account – you likely have direct debits set up to pay your bills, for example, if you do your food shop online, then keep your food money in your account. So work out what needs to stay put, then go to the bank and withdraw the remainder in cash.
On months when I haven’t done this and used my debit card, I have overspent. Every. Single. Time. There is something about having physical money in your hands that keeps you on track like nothing else.
Divvy it up!
Divide the cash into envelopes or something similar – you can get some gorgeous hand-crafted money purses on Etsy with multiple sections, or even use a cheapo expanding wallet which will do the job perfectly. Take out only what you need when you leave the house, plus always keep an extra £20-30 tucked away in your wallet or bag somewhere in case of emergencies (If you need to spend this, remember to put it back again from whichever category the unexpected spending came from).
Food money gets divided into weeks in our house, as I menu plan and shop weekly, if I overspend, then that is cash I can visibly see coming out of next week’s food slot, and I know we won’t eat so well that week – this tends to keep me on track!
I try and allow a realistic budget and also have a couple of categories which don’t often get used, for example, we have a ‘hairdressing’ category into which I put £20 a month. But I am a crunchy hippy mum who doesn’t like waste so even uses shampoo sparingly (or shhhh…. not at all!) and cuts her own and her families hair. I miiiiight occasionally feel the urge to go pink, or teal, and splurge on some funky hair dye, but haven’t actually been to the hairdressers in YEARS. So I can either carry the money over each month and let it build up, (in case of DIY home hairdressing disasters…) or put it into….dun dun duaaaaah! The Adventure Jar!
I got a big old pickle jar from the recycling centre (I have actually since seen them being given away in fish and chip shops) and this is where we put any remaining money at the end of the month if it isn’t a category that needs to build up. Most of our money slots are pretty accurate and get spent each month, so there isn’t always a lot left, but another thing I do is always allow 5 weeks of food money, then in a 4 week month, I put that extra week straight into the jar. There is something so pleasing about watching actual cash build up, that it invariably makes me want to spend less.
The Adventure Jar is so named because it gets raided whenever we feel the need to have an adventure. We grab a handful, take to the beach, go camping, or otherwise explore and get out into nature, rewarding ourselves for our efforts and reminding ourselves of what is important in the process.
- Tracking spending
- Allocating a realistic budget
- Using cash
These three tips have been integral in helping us manage our money better. These days we no longer have overdrafts AT ALL, have paid off some of our debts, and are making dents in the rest, as well as actually having a little bit aside for the first time in our lives. I don’t think we could have managed to get this far without starting out with these steps. Hopefully, you’ll find this as useful as we have! What are your top tips for keeping on track of your spending? Please comment below!