Frugal Budgeting For A Brighter Future
Frugal budgeting or as I like to call it simple budget planning, is something
I have now done diligently for at least ten years. Since then I have always
known exactly what my financial position has been and whether I need to
make some adjustments to my spending. It's been easier than I thought
it would be as I am not very good with figures and the thought of slaving
away over budget planning every month filled be with dread. But once you
have spent some initial time sorting out your plan, it's a breeze, you
just have to update it every month and most importantly stick as close
to your plan as possible. 
Why is frugal budgeting so important?
The four main reasons for being in control of your money are:
- Avoiding debt
- Prepared for unforeseen events
- Security
- Happiness
The last one being the best one of course. Not having to worry about
your finances and being in control, even if you do have some debt, is
one of the most liberating feelings anyone can have. You are the boss
of you, not your bank manager. You may not have a lot of money but you
know where you are going and how long it will take you to get there.
What does frugal budgeting involve?
Basically you will have to look at all, and I mean all, of your out
goings as opposed to your income. Sounds painful, but once you get started
it can be quite interesting to really discover just where you spend
all your money every month.
- The first step is to set up your frugal budgeting template. This
can be done in several different ways and it very much depends on
the sort of person you are and what you feel most comfortable using.
For instance there are online budgeting software that will help you
to organise and stay on top of your finances as well as flagging up
errors you may have made. Or you may feel happier setting up your
own computer spreadsheet. Then of course there's good old pen and
paper.
- Spend quite some time thinking about all your out goings including
ones that may be irregular like licenses and subscriptions. The more
you can think of the better, but don't worry if you forget something
it can always be included later.
- Use your bank statements over the past year to see what has left
your account to help you remember your out goings.
- Keep your answers honest and as accurate as possible. It's no good
guessing that you spend $20 a month on cat food if you actually spend
£30. All that will happen is that your budget will end up totally
useless and the only person to suffer will be you.
- Include in the frugal budgeting plan future expenses like birthdays,
holidays and Christmas. Decide on a budget amount for each of these
and update your figures as you implement your frugal living plan to
buy gifts throughout the year. This way you will not be tempted to
spend more when the event arrives.
 Personal
spending
There also needs to be a column in your frugal budget for personal
spending. You know all those little things you buy on a daily basis
that you don't even think about, like a bag of crisps here, a coffee
there, or that weekly magazine you always buy. However to really know
what you spend on this, it is a good idea to keep a personal record
of all your daily spending for about two weeks. It will really open
your eyes as to just how much you are spending. Now you have the tools
to do something about it and to reset your personal spending limits
which can be entered and monitored in your main budgeting plan.
A good way to keep to this new limit on your personal spending is to
only take the cash you need for that day out with you and leave those
cards at home too. You may even find that because you are even more
aware of the amount of money you have to spend that you are even more
careful with it and might still have some left over at the end of each
day. That's what happened to me.
Assessing your frugal budgeting plan
Once you have completed your plan, it is now time to really look at
it in detail. You will now know if you are living within or above your
income.
Living within budget - great but hold on, this is no time to
get complacent, you may still be spending too much on certain items
and you could still be making more savings.
Living above your income - don't panic but do realise that this
can't go on. Living beyond your income will end up with spiralling debts
and your income will go on paying interest rather than paying off the
debt. Instead go through every item on your budget and ask yourself
these questions:
- Can I get this cheaper?
- Do I need to this?
- Can I reduce this spending?
This might mean some time looking into cheaper deals on insurances,
credit cards, mortgage payments, utility suppliers etc but you could
end up saving yourself a lot of money.
If you still need to make more savings after this to live within your
budget here are a few more options:
- Buy cheaper products: for instance buy the shops own brand goods
rather than going for the well known brands.
- Buy less: ask yourself if you could live with out your daily newspaper
and do you have to buy the latest CD's, couldn't you wait until they
are cheaper or borrow them from the library. There are often many
things that you suddenly realise that you could live without.
- Be frugal: follow the tips and advice here on Frugal Living Tips
and save yourself loads of money. Once you realise that being frugal
saves you money it soon becomes very liberating and even fun. Heck
it can even become an addiction.
The Pitfalls and safeguards
Ok so you've got your frugal budgeting plan, but how do you stick to
it and how do you stop yourself falling into the same old traps?
Step 1. Tell close friends and family about your plan. Yes this
may sound strange but it works as an incentive for you to stick to it.
After all you don't want to have to tell everyone that you failed.
Step 2. Don't trust your bank statement. Many people fall into
the trap of looking at their statement and believing that's how much
money they have. All it really tells you is what your account is like
on that day, it doesn't take into account any future out goings. Instead
trust your budget plan and keep it up to date.
Step 3. Create several other bank accounts for things like your
personal spending and holidays. Set up automatic transfers from your
main account, so that money is separated out (make sure accounts for
holidays and savings are in accounts that pay the highest interest).
Then only use your personal spending account to take money out of, once
it's gone it's gone. This works wonders and really helps to keep you
on track.
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