Tuesday, 4 February 2014

Tackling budgets

After achieving debt freedom in October 2013 I gave myself a couple months to just let my hair down and enjoy life.
I needed it after being so focused on the goal of being debt free. I enjoyed the Christmas festivities without getting into debt it felt soooo good.
However it could have been so easy to fall back into the trap of overspending. Of course every parent wants to give their child everything on their Christmas wish list. Most people around me were busy rushing around the shops spending money they didn't have. I didn't. 
I feel like I am bragging! I hope I don't come across like that.
Far more important to me was to spend lots of quality time as a family.
We both work full time so time spent as a family is precious. We had been brought up to believe that money can't buy you love. We want to bring our son up to think that too.


Money is needed to pay the bills, put food on the table and provide a future for our family.

I have mentioned already I am a trained accountant. Budgets and allocating money to pots is second nature in my professional life so setting these targets has to come across to my home life also.

Over left overs during our Christmas holidays the OH and I devised a budget with a little help from the budget planner on the MoneySavingExpert website.
This website is a treasure trove for getting more for your money and making every penny go further. If you don't do anything else today take a look. I dare you not to save money. Anyway I digress....

 Image: fijourney.com

It is quite simple...

We determined what was the minimum we had coming in each month. This gave us the maximum we could spend. Spending beyond our means is no longer an option in our overall goal of mortgage freedom and saving for the retirement pot.
From this essential spending was determined. In this category is the mortgage, council tax, gas, electric, water, insurance, TV license, mobiles, home phone, broadband, mortgage overpayment, household maintenance pot. These are fixed monthly costs that invariably don't change. If they do the whole budget is reviewed. This is paid for before anything else.
Next comes the variable spending. In this category is the food shop, petrol and motor expenses. These vary from month to month but a ball park figure is set and as best we can we stick to it. If we go over one month we cut back the next. We do this by eating up our stores or not making that unnecessary trip in the car.

The rest is what we consider as luxuries. Such as days out, hobbies, eating out, hair cuts, clothes, holidays, birthdays, Christmas. Within this luxury category we set aside an amount each month into a savings account from which these luxuries can be bought or paid for. If it isn't there we can't have it.

If we are lucky and have been careful with the budgets and our calculations we have some free money left. OK its not free but this is the money left that we can buy whatever we want with without guilt or questioning from the OH. So if I want to buy another pair of shoes that I don't need I can!!

And that's it. This is how we do it. How do you tackle budgets? Have you got any tips?