Saving Money & Wasting Less

Lesson 6: Budgeting

Keeping to your budget

For most people, keeping to the budget means keeping a record of expenses and balancing them against the budget amounts that you worked out in the last section. There's no way to 'sex up' or glamorise this process. It's not going to win you any points among the 'trendy' or 'cool' brigade, but it will save you a lot of money.

Some people find withdrawing the budget amounts in cash and keeping them in envelopes marked 'gas', 'groceries', 'electricity', and so on, works, and it's probably the simplest system. For most of us though, it's all done on paper (especially if actually withdrawing your budget amounts would put your account in the red).

There are many ways of sticking to your budget and organising your records, but the following is a system that has worked for me for several years now, despite the fact I have an erratic, irregular income. Some people keep their records on computer and use an expensive accounting program to enter all their expenses and budget items. I've gone 'low-tech' and keep a notebook instead. I keep it with me, and enter in my expenses as they occur.

Firstly, as explained earlier, I work out my budget expenses and income, and ensure the expenses are less than the expected income. I work out how much to pay myself, and include some savings in the budget.

I have a small notebook with entries for each of my budget items under general expenses. I leave several blank pages between each entry so I will have room for entering the transactions. I have the following columns:

• Date
• Details
• Budget
• Spent
• Available

On my pay day (the day I pay myself), I enter the budget amounts for each budget item, which is then the initial amount available. I keep the book with me, and write in expenses as they occur in the Spent column, and subtract the amount from the Available to give me a new amount I have available to spend for the rest of the week.

Here's an example:

Books and magazines

Is it worth the effort?
If you've never budgeted before, this may seem like a lot of work to do. After all, you're going to be writing in your book (or entering into your computer) every single purchase you make.

I have at times decided I didn't need to budget any more, or it was too much effort. After a few weeks though, I notice my bank balance starts to take a nose dive, and my impulse buying goes up. I always go back to the budget, and my financial situation improves very quickly again.

Keeping to the budget is just a matter of keeping the book with you, or keeping receipts and entering the details later. It doesn't matter how you do it, as long as you keep track of where and how you're spending money.

You will soon learn where you are over-spending and where you can cut down. You may be surprised at how much money you currently waste, and the very fact that you're going to write it down helps to curb impulse buying.

As I said at the beginning, budgeting and keeping to the budget are the most important things you can do if you want to save money, if you are in debt, or if you are constantly spending money you don't have. If you know where your money is going, you will start to take control of it.

Refining the budget
After keeping your budget for a few weeks, you may need to refine it as you get better information about what you are actually spending, as opposed to what you thought you were spending.

If you're keeping to the budget by writing amounts on paper, rather than keeping cash in envelopes, you may end up with negative figures. If so, you're over-spending, and either need to spend less, or revise your budget.

Re-visit your budget figures and change your estimates until they are more realistic, but the total expenses are still less than your total income. You may need to cut some expenditures out altogether, or reduce discretionary spending further.

Refine your budget as often as you feel you need to in the first few months, but once you have a clear idea of your expenses, you should need to refine it less often. You just need to stick to it!

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