If your attempts to budget and save money have failed more times than you’ve been told to wash your hands or abide by the two-metre social distancing rule, then it’s time to take back control. Here are five of the most common budgeting mistakes and how to avoid them.
1. Giving up
Budgeting can be hard, especially if money’s already tight, and it can be tempting to throw your hands up and pack it all in – don’t. Budgeting is like running a marathon, it can be arduous and challenging but with determination, you’ll get to where you want to be, one step at a time. It’s unrealistic to expect pots of money to magically appear after just one, two or even three months, so stick with it and hang in there.
2. Not having ‘fun’ money
A common mistake is not giving yourself an allowance for the fun stuff, whether that’s takeaways, new shoes or a binge-worthy supply of chocolate. Budgeting is about saving money but it doesn’t have to mean being miserable and it’s ok to set yourself an allowance for treats.
Having a little cash to spend on what you want can also help you stick to your budget in the long term. How much you should set aside really comes down to what you feel is ‘disposable’ when you take into account the necessities you need to cover. A good starting point is around 10% of your income after tax. So, if you take home £1,000 a month, your fun budget would be around £100 for the month or about £25 each week.
3. Not accounting for everything
If your mindset is ‘if it costs less than £5, it doesn’t count’ then it’s a good idea to change it. Everything you spend money on really does count. That daily £2.50 coffee you pick up on your way to work? Pre-pandemic, that was probably costing you around £50 a month. So, if you’re working from home, you’ve already saved yourself enough money for something a lot more exciting than a cup of hot water and ground beans.
Budgeting and saving money means accounting for every last penny you spend, from the big stuff to bus and train journeys and the sausage roll you buy for lunch.
4. Not having an emergency fund
Unforeseen events are exactly that, but don’t let them blow your budget. After all, who could’ve predicted that a virus would disrupt the global economy, affect your job or leave you in lockdown for an unspecified amount of time?
Less drastic but equally unpredictable is when your car might need new tyres or brake pads, or when your washing machine might blow up. The point is, while you can’t anticipate the unexpected, you can prepare yourself for any curve balls life decides to throw at you.
If you think you might be tempted to spend your emergency fund, open an ISA or a savings account and pay into it every month via a standing order from your current account. Also, don’t fall into the trap of assuming you don’t have enough money and that it’s not worth saving for emergencies. Just £2 a day can help you save over £700 a year!
If you’re thinking longer term, the Money Advice Service recommends having about three months’ worth of essential outgoings in your emergency fund – enough to cover your rent/mortgage, food and bills.
5. Not keeping track of your spending
You can’t budget and save money in your head. It’s simply too hard to keep track of everything – and too easy to round up or down and take a guess – none of which will ever give you an accurate picture of your finances. It’s like when you tell yourself you didn’t really eat that 500g bar of chocolate and packet of biscuits all by yourself and then wonder why your clothes don’t fit anymore.
One of the first rules of budgeting is to write it all down.
Keep track any way you like, but it has to be a way that’s easy for you and one that will make you think about what you’re spending. If you like tech, check out our four best budgeting apps or if you’re more old school, jot down your expenses in a pocket notebook.
However you do it, doing it little and often, like at the end of every day, can help you maintain focus instead of it becoming a laborious weekly or monthly chore.
Don’t despair: help on how to budget and save money
When times are tough, sticking to a budget can feel like a particularly thankless and perverse task, but it does give you the opportunity to completely strip back your spending and sets a clear line between the necessities and the nice-to-haves. For more advice and tips about how to budget and save money, take a look at these easy budgeting tips.
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