How would you like to always have money in your bank account at the end of each month? Would it not be great to know you have a cushion of cash in your savings account waiting for you when you really need it. In this article we will look at how Budgeting for your Future is possible.
Getting started with building your cash cushion takes discipline and focus. If you want to start growing your cash balance you will need to start considering what is important to you and being as realistic as possible with your expectations.
Establish a Budget
The first step to building up your cash reserves is to sit down and make a list of all your monthly expenses. List everything, this includes any credit payments, personal loan payments, payday loan payments along with utilities, mortgage, rent. Everything you spend money on during the month ought to be jotted down including those sandwiches and coffee you buy on the way to work in the morning.
Making this list may take a few hours as you remember all your out goings. A tip is to look for receipts you may have put away in your purse or wallet. Regardless of how insignificant you may consider a purchase might be it is important that you have a clear picture of what you are spending your money on. Once you have the list of out goings go through it and decide which expenses you can do away with.
For example, how much money could you save if you made your own lunch every day rather than buy sandwiches and coffee. What about walking or cycling to work, is this an option. Do you really need your car, would it be cheaper to take public transport instead?
Debt Consolidation Loan
If you have outstanding payday loans, personal loans, overdrafts or credit card debts you could consider a debt consolidation loan. A debt consolidation loan is a loan which you can use to pay off all your outstanding debts. Having a debt consolidation loan makes it easier to manage your repayments since you now only need to keep track of a single loan. Not only will managing your debts be easier but you may also find the interest repayments are lower too.
Cut up your Credit Cards
When you go out shopping the temptation to spend more than you intended is great. In every shop there is something you will want. The best way to fight the temptation is to take only enough money to buy the essentials you need. Do not take your credit (or debit cards) with you.
Another tip is to always make a list of the essential items you need. Try not to deviate from the list. If you cannot find whatever you are looking for then the best option is to let it go and move on. Any money you manage to save on your shopping trip can go into your savings account to start building up your financial reserves.
If you do have credit card debts on thing you could consider is taking out a credit card which offers 0% interest on all balance transfers. If you transfer all your credit card balances over to the 0% card you will save yourself a lot of money in interest payments. Make sure that you check the terms and conditions of the new card so that you understand the length of the 0% interest offer and if there are any fees associated with transferring balances.
Once you have transferred over all the balances close those credit card accounts and be done with them. It might also be an idea to even cut up the new credit card to prevent any impulse purchases with that too.
Look at your monthly subscriptions. Here is a common list of subscriptions most people have:
- Mobile phone contract.
- Gym membership.
- T.V subscription service.
- Internet subscription.
You can add to the list anything you can think of. Let’s go through the list and see how we can reduce, replace or eliminate each of the above.
Mobile Phone contract: If are coming up to renewal time on your mobile phone contract see if you can jump onto a cheap tariff. Do not be tempted to upgrade your phone since doing this will increase your monthly payments. Stick with your phone for a little while longer.
Gym membership: How often do you go to the gym? If it is every single day then fair play. If you visit the gym only occasionally you may want to consider cancelling your membership and going for walks instead.
T.V Subscription service: Many people have Netflix or Amazon Prime subscriptions. These cost only £8 or £9 per month and you may not feel the money coming out of your account each month. Here the issue is not the money but the wasted time you spend in front of the television. Time to switch off the television. Take it off the wall, put it on eBay and sell it. In fact, doing this will also save you the annual T.V license fee of over £150. If you want entertainment there are loads of great things to watch on YouTube.
Internet Subscription: There are loads of low-cost internet services out there. No one really needs 100Mbps download speeds. Most YouTube videos can be watched with ease with less than 10Mbps.
Things which we think we need are not really what we need but what we have been told we need by the corporations. Every pound which you save from choosing less expensive services will go towards your savings account or to pay off your short-term loans, overdrafts and credit card bills.
Write Down Everything You Spend
During the day make a note of all your spending. See how easy it is to spend a few pounds here and there. The odd coffee during lunch and the quick packet of crisps from the corner shop all add up. If you were to add up all the money you spend on little things all add up to a too insignificant amount of money enough to payback a small loan.
At the end of the week total the amount you have spent on the little things and then next week try to put the money you would have spent on the little things into a jar at work or home and you’ll see that it is a tidy little sum. Imagine how much money that would be at the end of the year. Would it be enough to pay off all your credit card debts in one go or at least put a real dent into the balance?
What we want to achieve is the following:
Avoid the need to take out bad credit loans.
Start building up a cushion of cash for financial peace of mind
Only buy items you need from the shops.
Subscribe only to the services you really need and cancel or reduce those which you do not use all the time.
Keep track of all your weekly spending and get it under control.
Understand how the little expenses can soon start to add up.
Understanding why we spend money
Do you ever wonder why you sometimes spend more than you can afford and end up in debt having to take out short-term loans to cover your expenses until the next payday? What drives us to spend more than we can afford can be put down to boredom, impulse and even envy.
Being stuck at home with nothing to do forces us out to the local shopping centre where we are surrounded by so many temptations which makes us spend more than we really need to or want to.
Walking around the shopping centre we see things we want rather than need and out comes the credit card that is already groaning under the weight of debt. We know we should not be spending any more money but think why not, we only live once. This idea that we only live once is understandable but why live under the shadow of debt.
Envy can also force us into debt. How many times have you been sat in front of the television and seen celebrities living the high life? It is only natural to feel a pang of envy and to address this what do we do? We go out and buy stuff we can ill afford.
To counter all of the above is straight forward. Boredom can be cured by taking up a hobby. Hobbies do not have to be expensive, they can be writing or reading. Why not start a website and post articles about your interests.
Impulse is also easy to fix, just don’t take any money when you go out, but if you do take out any money just walk away when you see something you want. Let the desire to own things die down. Over time you will find it easier to put things out of your mind just as quickly as they entered your mind.
With envy the only solution is to come to peace with the fact that celebrities are not real people and all which you see is artificial and constructed to relieve you of your hard-earned money. Also, throw away your television.
Have a Goal
When you start to budget and put money to one side you will find doing it so much easier if you have a goal in mind. Why are you saving up? Is it to pay off your mortgage? Maybe you want to put your children through university or pay for a deposit for their first home. Whatever the goal might be you will want to make it worthwhile. Setting goals so that you can buy a new pair of shoes or to go on holiday might seem like a good idea, but holidays are not long term like a property or putting your children through university.
Plan how much you can put away each month and work towards that goal. Use your imagination on how you can increase the growth of your savings account. So that you do not need to take out any loans in the future.
Building up a financial cushion to pay for worthwhile things in the future does take hard work and discipline. So why not reward yourself with a meal out or buy something nice for yourself when you reach certain milestones. Such as when you hit £1,000 you go for a meal out (not too expensive) or when you hit £5,000 you buy yourself a nice pair of shoes or such like. Remember not to let your spending get out of control. You have to keep your eyes on the prize. There are plenty of restaurants which have promotional vouchers you can find on-line that will allow you to get money off your meal. Keep a look out for them. There are lots of websites out which promote free stuff where companies are happy to send you samples of their products in exchange for a review of their products.
If can be difficult to stay motivated when you are budgeting and saving up. You have to remind yourself why you are having to make sacrifices when you see others around you going off on long holidays and driving around in new cars while you have to make do with staying at home and driving around in a 10 year old car that has seen better days.
You are doing this so that you do not need to rely on credit cards, overdrafts or any short-term loans in the future. Only spend money on what you really need. Think twice before handing over any cash and consider the alternatives. Can you make what you have last longer?
If you can identify where money can be saved and where it is currently being wasted, you can start to build up your savings so that one day you will a nice cushion of money in the bank you can count on.