Were you someone who thought budgeting was silly?

Are you sick of saying to people: “I can’t afford to” when they ask you to do something with them?

You want to enjoy life, not be restricted by money!

Well, budgeting is a great start, so I commend you for getting here.

This is where it all starts…no turning back now!

Why budgeting?

Before you even consider making a budget, you need to think about WHY you are budgeting.

As human beings, without having a concrete end goal in mind, we tend to lack motivation to do something like this.

And who can blame us!

Budgeting is hard and takes persistence and will power.

So if you’re someone who isn’t very good at managing your money, then you really need a reason WHY.

Do you want to budget because you want to save up for a house? A wedding? A holiday of a lifetime? Inheritance? 

Whatever the reasons, you need to have your reason why at the forefront of your mind.

Every time you spend money on something you shouldn’t have or used some of your savings to buy something that just isn’t necessary… go back to your reason why.

Hey…if your reason why is to travel more and you need some travel budgeting tips, check out my post on coming up with your realistic travel budget.

Your reason why is what will keep you grounded and remind you why you’re budgeting in the whole first place.

Have your reason why taped to your credit card if needs be!

In order to stay persistent you need to have a purpose.

What’s yours?

How to start budgeting

If you’re not used to budgeting, then it can be a pretty hard habit to get into.

And that’s just what it is, a habit.

How do you get into other habits, good and bad?

You do them consistently, usually after or before something else you do consistently or at a certain time.

For example, most people brush their teeth after they’ve had breakfast, this is a habit.

Some people have coffee when they wake up.

Some people watch TV after they’ve had, or during their dinner. This is a habit. 

You get my drift?

So how do you make budgeting a habit?

You guessed it!

You do it consistently at a certain time or after another habit.

On average it takes a little more than 2 months to form a habit.

How do you make budgeting a habit?

So the first step is to find a time when you’re most likely to budget and fit it into your routine.

This might be every payday or every week after you’ve had breakfast on a Monday for instance. 

Try and find a time when you will budget and stick to that for 2 months.

Something to remember when budgeting is not to push yourself too hard and don’t be too strict if you’re not used to it or never done it before. 

It only ends one way, you’ll give up and go back to your old ways. 

…And being too restrictive is just no fun and no way to live.

When I was a student and it was the first time that I was given any large amount of money to control, all my friends were blowing it and getting into their overdrafts. 

Well…I was the opposite.

To be honest, I was almost scared of spending it because I had a certain amount to last me about 3-4 months before the next loan payment.

It sounds silly that I was scared of spending…but I realise now that I had a “scarcity mindset” which we’ll cover in a bit.

So, instead of budgeting, I just tried to spend as little money as possible.

How crazy is that?

I ended up buying the cheapest products on the shelves no matter the quality and it just wasn’t a good way to live.

Instead, you should ease yourself in.

Budgeting can be adapted to your way of life.

Even if you just save £10 or $10 per month and you set aside another £10 for your emergency fund, if you stick to it, that’s the only thing that matters at this stage.

The only thing that matters is that you can show yourself that you can manage your money.

Once you’ve got into this habit, you can glamorise your budget later down the line.

But when you’re just starting out, you need to prove to yourself that you can do it and that you’re getting somewhere and that it’s achievable.

So, how do you actually start?

Step by step guide to budgeting

Step 1:

Go to your bank account and write down how much you earn and how frequently you receive it.

Write down how much you are currently spending and separate them into these categories:

• Outgoings (bills, rent/mortgage, tax, insurance etc)
• Food bills
• loans/ debts
• Fun
• Leftover?
• Current monthly saving (if any)

This will give you a good idea of where your money is actually going and whether you have any money leftover.

Step 2:

How much do you need to save per month?

Go back to the why reasons…

Why are you saving? 

Once you know how much you want to save, you can start to work out where you need to budget and how to design your budget.

Step 3:

Start to analyse your spending. Do you notice that you’re spending too much on a certain area such as food?

Write down a list of things that you can cut out or cut down on. 

Add up the costs and work out how much you could save if you cut down.

For example, suppose you buy coffee every day and this amounts to £50 per month. Could you cut down to 1 coffee a week or 2 coffees a week and save about £30 per month?

Write a list of all the things you COULD cut down on that aren’t necessary and will save you money each month

.

Step 4:

Now you’re in a position to actually start creating your budget!

Set a goal of how much you want to save per month.

A good way of doing this is by looking at what is possible for you. 

Your income minus your essential outgoings.

Essential outgoings = costs that you have to pay for such as rent/mortgage, bills, insurance, tax.

For example:

Your income = £2000

Your essential outgoings= £1000

Total spends= £1000

You therefore have £1000 to spend and save over the month.

But remember, this includes your food!

Work out how much you think you need to spend on food and think about whether you can cut down on food costs at all.

Perhaps you bulk cook meals or buy cheaper products or don’t buy as much to avoid wastage.

Once you’ve factored in your food costs for the month, I would suggest setting up 3 different bank accounts and splitting the remaining money into the 3 accounts.

These could be: 

• savings, investment and fun 
• Savings, emergency and fun
• Savings, travel and fun

The 2 common factors here being the savings account and the fun account.

So, whatever your goals are, your reason why, incorporate this into your plan.

Maybe you want to save money for emergencies, to invest in stocks, to travel or maybe to save for a wedding. 

Whatever your goals, make sure you create and account for them.

Allocate your remaining money into each category.

Maybe you spend £150 on food each month, so you have £850 left.

Divide £850 by 3 and transfer or set up a direct debit to allocate each account with £283.33. 

And remember:

• Your savings account can’t be touched.
• Your fun account is for you to spend on whatever you want!
• Your other account is to save for your goal and can’t be touched until you reach your goal amount.

Some people talk about saving 10% of your income. But there is obviously no right or wrong answer. 

You just have to do what you think is realistic and achievable.

These are the KEY WORDS.

Another idea is to create another account for house maintenance and allocate a little amount to that each week or month. 

This can be for any unexpected maintenance issues that was come up like needing to have boiler work done or needing to buy more cleaning products for example. 

If you save a tiny bit each month towards your maintenance, then you’ll find that you aren’t having to touch other savings to cover unexpected costs.

If you don’t own your own home, this may be a maintenance account for your car or a pet or anything where you may need to pay out unexpectedly. 

Pay yourself first

When I first heard this phrase, I never understood what it meant- pay yourself first!

You know what, I heard it being thrown around a lot, but I first heard it in the book “Rich Dad, Poor Dad.”

At first, I didn’t really get it because, I thought, well, if you pay yourself first, then won’t the taxman come calling or won’t you have your house repossessed?

But then, one day, the penny dropped.

…It didn’t mean don’t pay your bills!

When you get paid, as soon as you get paid, make sure you pay yourself first, as in allocate the decided amount into your 3 accounts.

Do this before spending any money. Before anything else!

Even better, automate it!

Then, let your bills be automatically taken out and you should be left with your food money and of course your money in your fun account.

You will then not have the temptation of spending the money before you have a chance of saving it. 

It will be out of sight, out of mind. 

Pay yourself first and then don’t think about the money!

What is zero-based budgeting?

Zero-based budgeting is where you give every single penny that you earn a purpose. 

So, your income minus expenses equal zero because you have given each pound a function.

For instance, if you earn £2000, then by the end of the month you’ll have zero. This doesn’t mean it all disappears into thin air.

This means that your money has gone to expenses, savings, investments, wherever you decide it should go.

Zero-based budgeting helps you to manage your money as it helps you get into the habit of putting every dollar somewhere intentionally and not have extra money lying around that you could spend on something useless.

This budgeting method forces you to be precise with what you’re spending and saving.

Money mindset: scarcity vs abundance 

Oprah Winfrey said that “if you look at what you have in life, you’ll always have more. If you look at what you don’t have in life, you’ll never have enough.”

This sums up scarcity vs abundance quite nicely.

A SCARCITY mindset is where you focus on not having enough money and to this degree, there will never be enough. 

A scarcity mindset is a negative mindset which focuses on win-lose situations.

So, if one person “wins” by earning a lot of money, it means another person loses by not having enough money. It’s the idea that there is not enough to go around.

Someone who has a scarcity mindset lives with the idea that money is “scarce,” so they may hoard money or think negatively of those people who have lots of money. 

An ABUNDANCE mindset helps you to believe that no matter what, you’ll have enough money and that there is more than enough for everyone.

An abundance mindset focuses on win-win scenarios and positivity throughout life.

Someone with an abundance mindset will be grateful for what they have and believes that there is enough opportunity for everyone.

Related posts: How to change your money mindset to travel more

Reverse your budgeting psychology 

Up until now, we’ve been focusing on how to cut costs so that you can budget better and save more.

But have you thought about making more?

Why does it have to be cutting down that is the solution here?

Perhaps you want to save money but you don’t have anything further you can cut down on, you’ve hit a wall.

Well, consider earning more money!

This doesn’t necessarily mean going to your boss and asking for a pay rise.

This might mean making some side income. 

In a sense, this way of thinking will help you to adopt an abundance mindset because it will open your eyes to possibilities of creating abundance and opportunity. 

If you do both cutting down on items that you really don’t need AND creating other forms of income, you’ll be on the right path to financial success!

How to stick to your budget

The first challenge, is coming up with a realistic budget.

Now, the second challenge is sometimes a bit harder, and that’s actually sticking to your budget.

Here’s a few ideas on how to stick to your budget…

Automate payments

Automate payments to your savings account(s) before you have a chance to spend the money!

Set up direct debits or direct transfers to your savings accounts so that you don’t need to even think about the money.

If you do this, you may be less tempted to spend it or find somewhere else to put it.

Try and make sure that once you’re paid, the money goes out almost immediately.

Make sure it’s realistic

If your budget is unrealistic and you leave yourself almost nothing to work with each month, then you’re unlikely to stick to it.

Make sure your budget reflects the reality of your situation and don’t leave yourself short, otherwise you will begin to resent the process.

If your budget is feasible, you may find that you’re not spending the full amount in your “fun account” and that you’re actually choosing to spend less each month.

Who would have thought it!

If this happens then you know that you’re on the right tracks and you’ll begin to start thinking about your budget in a positive light.

Also, if you’re realistic about your budget, then it means you’re more likely to stick to it, even if this means you’re only saving a tiny amount each month.

Most importantly…

The key is that you’re training your brain to get used to budgeting and managing your money well.

Once you can show that you are able to manage your money, you’ll be able to take baby steps to achieving your goals. 

Have fun with your “fun account“

If you’re someone who likes spending, then make sure you spend what’s in your fun account and don’t feel guilty about it, because you’re trying to budget.

You need to live too!

Make sure you also enjoy your money otherwise, again, you’ll begin to resent budgeting and fall back into old habits.

Have an accountability partner

Find someone who is also budgeting and keep each other on track.

If you have someone else that you’re doing this with, then you’re more likely to stick to it.

Make a vision board

As I mentioned before, you need a strong reason WHY if you want to make sure you stick to your budget.

A great way to focus on your goals is by creating a vision board and putting it somewhere that you will look at everyday. 

Make a collage of pictures of what you want to achieve and spend some minutes each day focusing on your vision board.

If your goal is to save up to go travelling, then stick a load of pictures of some places that you want to visit on there!

If your goal is to save up for a house, then print off some pictures of beautifully stunning houses and stick them on there!

How to love budgeting

Get competitive

If you love a bit of harmless competition, then make your budgeting journey competitive. 

This might be by being competitive with yourself, your partner or your accountability partner.

You could do a competition like, who can save the most in a month. Get creative and have fun with it!

Give yourself rewards

If you love a challenge, then set yourself a challenge and a reward if you complete a certain benchmark.

You might want to make a “goal chart” and each time you reach a milestone, you get a reward.

Make sure your rewards don’t contradict your budget though.

For example, if your milestone is reaching £200 in savings and your reward is to be able to buy an item which is worth £200, then obviously this isn’t going to work!

Think logically about your rewards.

For instance, one challenge could be that you have a day each week where you spend no money whatsoever.

If you complete this for a month, your reward is that you get a takeaway or have a pamper night, something rewarding but small. 

Make your goals achievable

This point also relates to making your budget realistic.

If you want to learn to love budgeting, then you will need to ensure that you’re setting achievable goals!

If you keep not making your goals each month, then you’ll start to get disheartened. You’ll start to see budgeting as a chore…and you don’t want that!

So, if anything, underestimate your savings goals so that if you save MORE than you budgeted for, you’ll be pleasantly surprised.

Track your money growth

A fun way to LOVE budgeting is by tracking your money growth.

Yes, it is exactly how it sounds!

You could make a graph or a spreadsheet or some kind of tracker, get creative!

Note down how much you save each month and watch your money grow. There is nothing more motivating than this.

You could even track your savings every 3 months so that you can see the big jump in growth.

It will make you feel like you are really achieving something and will make you WANT to save even more as your dreams start to become reality.

Get a change jar

Another way to save money could be to get yourself a change jar where you put all your spare change that you find in your pockets.

We all use cards nowadays anyway!

If you find yourself using cash and you get some change, put it in the jar.

Of course, there is no pressure to put the change in the jar, just do it whenever you think about it.

Once the jar is filled, empty it out and you’ll find you’ve got loads more than you expected!

To conclude…

If you’ve been trying to start budgeting and saving money for a while but not quite smashed it yet, then hopefully these tips have helped you to get started.

Remember, the key here is to get started and try to manage your money well, even it is a small amount.

Get started and watch your money grow!