So recently our budget has been playing on my mind a lot and whilst I have my own budgeting process I am currently on the hunt for any and all tips and tricks for tightening the purse strings. To offer some context, my husband and I have a business together which he has recently taken a back seat in as he has started studying full time. With the arrival of baby number 4 I plan on taking a full maternity leave (something I have not done before due to financial reasons and so as not to let our clients down).
This means that things will be very tight as we live on SMP and student loans for 9 months, whilst this sounds 7 shades of insane we have learned from the past that this time as a family is worth a financial sacrifice. Whilst we have a good savings pot – which allows us to take this risk – on paper we should be able to stay out of our savings, which is therefore what I aim to do.
I wanted to write briefly about my current budgeting process and ask you for your best advice for pinching pennies further. It’s likely my budgeting process is a little odd as – being self employed – we do not have a specific pay day which makes things tricky. There are 3 parts to my budgeting process which rely upon a few rules.
Rule 1: NEVER USE CASH. On my quest for budget tips I have learned that this is somewhat controversial but this is what I’ve always done and the reason is because of the paper trail it leaves. I want to be able to see every penny which leaves or enters my account. If a client pays in cash it goes straight into the account.
Rule 2: USE ONE ACCOUNT. To be clear, we have a separate business account and savings account but all personal financial traffic uses our joint current account. That’s all of our joint income in there, all bills, direct debits, standing orders and expenses such as food or fuel. In short, everything goes through here. This is again so that I can access information regarding every penny that has passed through our hands.
Rule 3: ZERO IS WHAT YOU MAKE IT. Basically, have a float, I can’t tell you how much of a float to have as that is up to you and will depend on your circumstances but if for example your float is of £500 then this is your new zero. You do not go below £500. So if rent is about to go out you let this account build up, don’t move anything to savings and then when your bills have gone out skim off the top (anything above this new zero) and move to savings. When you’re below your new zero you walk rather than fill the car back up or you make do with the frozen dinner you’ve previously batch cooked and avoid spending as much as is physically possible until you’re back in the black. Obviously, a bad MOT or an unexpected bill means this is not always possible, but this financial padding will mean these do not have to impact your savings.
So with all of that in mind, here’s how I keep track of it all.
Step 1: Assess. Open up your current account which now holds every piece of information you need. Go through item by item and document it all (or print the month’s statement which would probably be way easier but its only just occurred to me as I write this post) this doesn’t take as long as it sounds and if you do it at the end of every week it takes no time at all. To be clear you are documenting all expenses which are not direct debits or standing orders. We already have those covered elsewhere. Colour code everything, as you can see I use colours for food, fuel, and misc (eating out, birthdays, car repairs). Then in order to see where the money is going we add up all the green, all the pink and all the yellow and then we see that the reason you completely smashed the food budget is because you’ve been eating out and so the misc is off the scale YOU FOOL!
Step 2: Plan. It’s the beginning of the month, you now are armed with the knowledge that you bought 39 indoor plants last month so what now? Now you look at your expected outgoings for the month ahead and consider any possible anomalies. As you can see my biggest baby turns 7 this month so we have to consider her gifts and her party. We also go camping this month for the first time ever so have to budget for the supplies we don’t yet have. (Though we’ve been very lucky in being able to borrow a lot of things and are going to a well-equipped site so we won’t need to buy a collapsible version of every item in our house just yet.) In light of all of this, outline your budget, how much are you budgeting for the food shop? Or Miscellaneous, have you considered your car tax bill?
Step 3: Maintain. This is the crucial bit, a bit of assessing and a bit of planning as you go. Document your actual outgoings, is it all going to plan if not where is it going? Can you readdress this? Have you over spent on food this week? Perhaps a few meat free days will make the difference. If the fuel budget is looking thin for the rest of the month could you walk to and from school for a while? Have all your direct debits been as you expected? Maybe you can shop around?
So, as of right now that’s the system we use, and I do find it really successful but I don’t doubt it doesn’t work for everyone and I know there is always more to learn. So it’s over to you, can you help us with your own budgetty goodness? I’ll be scouring the internet and pestering you all on social media to give me your best tips for watching the pennies and will get back to you in a little while with what you all said. You can join the conversation here, or here or leave a comment below and let me know what you do to keep those purse strings wound tight. Or maybe let me know if there’s something that trips you up, perhaps we can work it out, a problem shared and all…