If you find yourself in your overdraft every month or running out of money just a few days after payday, creating a household budget is the solution for you.
We cover how to make a budget and most importantly, how to manage a budget so you’re financially comfortable month after month.
Why is budgeting important?
Budgeting isn’t just about staying out of your overdraft. It’s one of the most important life skills you can learn.
Having a full overview of your finances sets you up for long term success. You may want to buy a house or a car somewhere down the road, and staying on top of your money could afford you these luxuries. You’ll be able to figure out how much you can realistically save while not giving up your social life, keeping on top of your bills and maintaining a good credit rating, which is essential if you plan on taking out finance for a mortgage, car or anything else you may need.
To kick it off, take control of your current situation and the future will look a lot brighter.
How to do a household budget
We know how it is. Sometimes, the bills are overwhelming when you see them coming out of your bank account every single month. The key to keeping on top of them is to know when they’re coming. There are a few ways to do that.
Know your situation
While budgeting may seem scary, it can be easily done with a piece of paper and a calculator. If you’re tech savvy, you could use a spreadsheet instead. All you need is two columns named income and expenditure.
In the first column, write down the average amount of money you have coming in each month. This can be found on your payslip or a benefits letter. This is your income.
In the second column, write down any money you pay out. This includes rent, phone bill, car insurance, debts and utility bills. Make sure you include an allowance for travel, food and any other essentials. Add it all together and write down the total. This is your expenditure.
Read more: How to save money on household bills
Next, all you have to do is a little bit of maths, so grab a calculator:
Income – expenditure = disposable income
The amount you’re left with at the end, your disposable income, is what you have left over for the things you want, instead of the things you need. When you overspend your disposable income, it dips into your expenditure which means you won’t have the money to pay the bills. Not making payments on time can lead to a poor credit score, which can mean that you won’t be approved for loans later in life.
If your expenditure is more than your income, please reach out to the Citizens Advice Bureau about creating a debt management plan. They can help to ease any concerns you have about paying the bills, as well as help you to speak to debt companies about repaying any outstanding money owed.
Once you know how much money you have to pay out each month, organise the way you pay it. If you receive a bill in the post, call up and pay it straight away.
Setting up direct debits for your bills is cheaper than paying manually each month – you may even be paying extra for the paper bill when you can access it easily online. Call up your service providers and set up your direct debits. We’d recommend speaking to them about the day the bill is taken out as ideally, you want it to go out in the days following your payday so the money will definitely be in your account.
Once you’ve automated all of your bills, you may want to note it down on a calendar. Knowing when your bills are taken gives you an idea of how much you need to have in your bank on certain dates, as well as how much you’ll have in your bank account once they’re all gone so you can focus on spending on the fun stuff with your disposable income!
Use a budgeting tool
One feature our customers find extremely useful is our Wallets. A Vox Money account gives them the option to separate their direct debits after moving them into a wallet away from their main account. This removes the temptation to dip into their expenditures for the month.
You can also set up payment alerts so you get regular reminders of what’s going out. For example, you might have assumed a bill has gone out that hasn’t as the billing date fell on a weekend.
How to stick to a budget
Once you have the knowledge to do it once, you repeat the same process every month. Before the start of each month, take some time to figure out what’s coming in, what’s going out and how much you’ll have left over.
Split up your income
If you’re going overspent on your disposable income each month, it’s budgeting time again! We’d recommend using a Vox Money account for this.
Once you’re all signed up for your account, you’ll be able to access your main card as well as five wallets which are kept separate from the main account. We’d recommend allocating one wallet to your household bills, and use the other four to manage your disposable income.
Why not allocate one wallet to savings, then split the other wallets for spending on socialising and treats! It may take a little longer to save up for treats, but learning to say no to unnecessary spending is all part of budgeting.
Read more: How to use Vox Money’s Budgeting Tools
As we made budgeting sound so fun, why not give it a go for yourself? Sign up today!