Talk Money Week – The Importance of Budgeting
Creating a personal financial budget is key to helping you feel in control, achieve your goals, and have a financially secure future. A budget is all about giving you financial awareness and helping you understand your overall situation. They also allow you to set financial goals and help you get there.
By knowing where your money is being spent each month, you can make sensible choices and identify areas where you may be overspending. For example, the £3 coffee you buy on your way to work can add up without your knowledge. By creating a budget for buying coffee on your commute, you’ll be able to not only reduce spending, but you’ll also be able to save for something more memorable, like a weekend away with friends.
If you have debts, a budget will allow you to see how much you can afford to pay off each month, helping you avoid getting into financial difficulties. Emergency funds are also something that is crucial to budget for, and they cover any unexpected bills or financial emergencies, meaning that you’ll always have funds to fall back on.
Knowing your numbers enables you to make more personal choices with your money, giving you a sense of control and peace of mind while also reducing the potential stress caused by finances.
The wellbeing benefits of being in control of your finances
Money worries are a common source of stress and can have a huge impact on your overall wellbeing. By having a better understanding of your finances, you’re better equipped to handle any financial challenges life throws your way.
It's no surprise that money worries can cause relationship problems. However, by being open with a partner and family members about any financial troubles you're having and working together, you'll benefit from happier and healthier relationships.
Being in control of your finances brings with it a sense of freedom and flexibility to make plans for your future goals. It also allows you to reassess priorities and live life on your own terms. By having complete control of your money through budgeting, you can then make more informed life choices, which could be a new hobby, job, or lifestyle change.
Top tips for creating a personal budget
- Keep track of your income and outgoings - Make sure you track everything you spend. This isn’t just your regular direct debits and bills, you may be surprised at where your money does get spent!
- Use a budgeting tool to help you track your income and expenses - There are many great apps out there to help you, or you can just grab a pen and a notebook.
- Have a goal to work towards - Whether that’s saving for a holiday, paying off a credit card, or simply building a rainy-day fund, start with a small amount each pay day and try to increase it as you get used to not having that money.
- Split your budget into different areas - For example, one third for your regular monthly bills, one third for social expenses, and the final third to put into a savings plan or pension.
It’s important to get a good balance between essential expenses and things you have a choice about. This includes rewarding yourself for sticking to your new financial budget. Remember to be realistic, don't underestimate your expenses or overestimate your income. Make sure your budget is sustainable, and you can stick to it in the long term.
When your circumstances change, make sure you review and adjust your financial budget accordingly. This could be following a pay rise, losing a partner’s income, or becoming a parent. Things don’t stay the same, and your budgets should be flexible and adapt to your needs.
If things do feel like they are getting out of control, speak up and seek professional help, as there’s’ lots of support and advice available. If you would like to learn more about how our team of financial experts can support you in making the most of your money, please visit our webpage and get in touch.