Top Tips For Easy And Effective Budgeting

Budgeting is always a good idea, even if you're not on a fixed income, or saving up for a large purchase. It's just good financial sense to make sure that you are able to save some money and set it aside for retirement, leaner times, or other major expenses you may have in the future. Over-spending is most easily resolved by setting a budget, but if you want to establish one, you're gonna need to cut back on some of your expenses. Money Saving Expert can show you how to plan a budget, but first, let's take a look at what you can keep and what you should cut out to stay on track.

Make A List Of Necessities

The first step in establishing a budget, if you want to cut back on unnecessary spending, is to make a list of absolute necessities that enable you to live a comfortable life. We're talking about non-negotiables like rent, gas, taxes, bills, food, etc. Everything else that is not necessary to you and your lifestyle is, practically, a luxury that you are paying for. Now, luxuries are allowed, even on a budget, but you will have to adjust your understanding of what constitutes a necessity and what constitutes a luxury expense. You should figure out how much necessities will cost you every month, and then add a small percentage of that to be dedicated to any additional luxury spending.

Figure Out How Much You Are Spending On Luxuries

Another important aspect of setting a budget is figuring out how much, exactly, you are spending right now on items that you simply do not need and that you could live without. Tallying up the cost can be an extremely sobering experience and can actually serve as motivation to cut things out, if purely because of the shock of it all. You will absolutely be surprised (in the worst way possible) at how much money you are wasting on unnecessary things that you probably don't even want that much and that have no real value to you, personally.

Choose One Luxury Expense To Keep

Every diet has a cheat day, so you're allowed one here, as well. If you're scrimping on everything else, then allow yourself one luxury expense that you get to keep, in order to make things bearable and to stop yourself from breaking down and spending frivolously. What is hard for you to give up? Is it fast food on the weekends? Your weekly film date with your friend? What about that monthly spa treatment you get? Do you smoke? All of this stuff is "unnecessary" spending, but some things you just can't out, or at least not right away.

Here Is What You Can Cut Out Or Replace

What you need to know is that the key to budgeting isn't depriving yourself, but finding ways to reduce costs by cutting back or replacing things that are too expensive. The Money Advice Service has some good information on cutting costs. And in the meantime, here are a few things you can do:

• Instead of your daily trip to Starbucks, invest in a thermos and start making coffee at home and taking it to-go. You may end up saving hundreds of pounds per year.
• Eating out is what is eating a lot of money. It's very expensive and very much a luxury, so perhaps limit it to weekends, or treats, and start taking a packed lunch to work every day.
• And speaking of eating, have you ever calculated how much money you are throwing away on groceries that go bad? Try to be more conscious and realistic about how much you actually eat and consume before it has the chance to become inedible. We throw away hundreds of pounds worth' of food every year.
• Nights out can also rack up quite a bill, so why not look for other kinds of entertainment, instead? You can still have a cheeky drink at home, but cheaper, if you just invite your friends over and have them each bring a snack. Plus, you save money on the taxi fare!

As you can see, budgeting can be easier than you thought, if you are conscious of the money you spend in every area of your life. StepChange can even help you out with a budgeting calculator! You don't need to live a frugal existence in order to save money; all you have to do is find ways to cut back on unnecessary spending and work your way around those costs by replacing them with cheaper alternatives. Sometimes, that means letting go of some of your old, expensive habits, but you'll save money instead, and you'll be grateful for that in the long-run