How to live with a budget

by | Nov 13, 2020 | Articles, Budgeting

Notice how I said, live ‘with’, not ‘on’? The first step to successful budgeting is acknowledging that your budget isn’t just a temporary measure or a means to a limited end. It’s part of how we look after ourselves. If we accept that our financial security is an important part of our overall wellbeing, then budgeting is a vital part of our self-care. This small shift in language can lead to a giant leap in mindset, and help us to feel more content and in control.

By marrying the practical elements of budgeting with the deeper mindset shifts that we need to make, we can create long-lasting habits that will benefit us financially and emotionally. Follow these steps, and you’ll be on your way to living with a budget that works for you:

Don’t crash budget

It can be tempting, when making your budget, to tighten the purse strings to their absolute limits – particularly if you’re experiencing guilt, shame or regret over your financial situation. Inflicting a restrictive and miserable budget on yourself can become a way of punishing yourself for perceived past mistakes, but it’s really important to fight the urge to do this. In creating a punitive budget, you are further damaging your relationship with money and, perhaps more importantly, setting yourself up to fail. Think about the super-restrictive diet regimes that exist, and what the results of those usually are: they sometimes work in the very short term, but the long-term effects are often very damaging. And so it goes with budgets and spending.

Identify your little luxuries

Before you actually sit down to create your budget, it’s a really good idea to look through your past bank statements, and see where you’re going wrong, or where you could make cuts without affecting your quality of life too severely. When you look at expenses that you would consider ‘luxuries’ – i.e. things other than the bare essentials, make sure you factor in whether or not they contribute value to your life. For example, if your gym membership goes largely unused, it’s probably something you can cut, but if it’s how you unwind at the end of a stressful day, or how you keep yourself healthy and happy, then it probably needs to stay. 

If you base your budget on the value that things hold for you, rather than just their monetary cost, you’ll have a clearer picture of what your income is paying for, and will be far more likely to succeed. Safeguarding some ‘treats’ is absolutely fine, as long as they’re accounted for in your budget. The worst thing that you can do is to leave them out of your budget, but then continue to pay for them anyway.

The basics are all you need

When it comes to actually making your budget, there’s no silver bullet approach that will magically free up an extra £500 per month for you – it’s really about doing the basics well. Your budget essentially consists of balancing your income and outgoings, and having a plan for any ‘disposable’ income – i.e. what’s left over after essential bills. That’s it. 

Make a plan for what’s left

One of the most crucial parts of budgeting is to have a solid plan for your income after bills – because we all know just how easy it is to let that cash disappear on incidentals and impulse purchases. Ideally, you’ll be splitting your extra income three or four ways:

  • Paying off debt
  • Short-term savings (like an emergency fund, or savings for Christmas, birthdays etc.) 
  • Long-term savings (like for a house deposit, big trip or pension)
  • Enjoyment!

Budgeting and planning go hand in hand, and once this way of thinking becomes a habit, everything suddenly feels much easier.

Common pitfalls to avoid

There are several reasons why so many people start budgets and quickly abandon them, thereby undermining their financial confidence and making their relationship with money even more fragile:

  • Being vague or inaccurate with your budget can mean that it never seems to be ‘working’. If you plan for one scenario, but act out another, you’ll trip yourself up.
  • ‘Sleep-spending’ on small, incremental things.
  • Losing interest, or sabotaging yourself.

Making sure that you’re properly engaged with your budget, and putting in all of your expenses even when it makes you feel uncomfortable is one part, but making sure that your budget supports your enjoyment of life will stop you from getting bored.

Tips for sticking with it

There are a few ways to make living with your budget easier, so that it doesn’t feel like such a slog, or an infringement on your flexibility:

  • Create a realistic, minimal waste meal plan. It can include takeaways and eating out to suit your income and your wishes, but planning your meals will help you to spend smart and waste less.
  • Make looking at your budget a ritual. Pick a time each week when you will go through it, adding things and making changes. You could even incorporate it into a weekly self-care ritual – make it something you look forward to.
  • Remember that it’s not just about the numbers. Leave time and space to process the life events and feelings that go alongside your budget, and adapt accordingly. 

Remember: your financial wellbeing is a critical part of your self-care, and budgeting is an important element of that. Once you have it nailed, it’s a brilliant tool for financial confidence, a feeling of security, and the ability to actually say yes to things, and know that you can afford them.