effective budgeting

Why spending could be damaging your dreams; How to create a budget that supports your life goals Part Four

Photo courtesy of Shutterstock

Photo courtesy of Shutterstock

 

Last week we examined how to cut back on spending and create a life goals budget, this week we look at how to create a monthly savings budget, how to budget with cash envelopes and explore how to evaluate your earnings strategically.

 

Download “Finance-Budgeting-Spreadsheet.xlsb” Finance-Budgeting-Spreadsheet.xlsb – Downloaded 144 times – 17 KB

 

Monthly savings budget – five year plan

 

Now plan how you are going to allocate your savings to your goals each month, using the life goals budget as guidance to when you will start saving and for how long. Also bare in mind when the goal is due to be completed and take into account the more minor things you will need to save for like birthdays, anniversaries or Christmas. This is the stage where you will clearly see how you are able to realize your goals financially and it is an incredibly powerful exercise, one which will empower you to create the life you long for!

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Why spending could be damaging your dreams; How to create a budget that supports your life goals Part Three

Photo courtesy of Shutterstock

Photo courtesy of Shutterstock

 

Last week we explored what to consider when creating a budget and assessing your current spending. This week we examine how to cut back on spending and how to create a life goals budget.

 

Cutting back on spending

 

Once I honestly assessed my current spending I evaluated what I could cut back on and drew up a revised monthly expenditure sheet. Although I felt a strong inclination to make major, often unrealistic, cut backs, I knew I had to be practical in terms of what I needed to live on whilst also being thriftier with my monthly spending. I also made a plan to pay off all debt, a non negotiable element of any budget.

 

To do this yourself, simply use the second column on the first sheet of my downloadable spreadsheet.

 

Download “Finance-Budgeting-Spreadsheet.xlsb” Finance-Budgeting-Spreadsheet.xlsb – Downloaded 144 times – 17 KB

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How effective budgeting can help to prevent a mid life crisis

It is no exaggeration to say that a major contributor to my breakdown back in 2009 was due to the state of my finances. I had nothing and was totally reliant on my partner for finances, who frequently used money as a means to control me. The situation made me feel helpless.

 

Although this is uncommon there are many ways that effective budgeting can help prevent a mid-life crisis or breakdown. How many people do you hear of who are struggling financially and then turn forty and breakdown?

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Why spending could be damaging your dreams; How to create a budget that supports your life goals Part Two

Photo courtesy of Shutterstock

Photo courtesy of Shutterstock

 

Last week we looked at how your spending could be damaging your dreams, this week we explore what to consider when creating a budget.

 

What you need to consider when doing your budget

 

There are many things you need to consider when creating a budget. Firstly you need to accommodate for the unexpected, such as what you would do if you lost your job. Do you have enough savings? Typically financial experts advise to save six months worth of living expenses to cover us for such an event.

 

Other things to consider are the different types of insurance, pension plans, medical cover, car costs and car emergency fund for repairs. Below is a brief list of these things so you can do your research and get the necessary cover. Whilst you might not think all of these things necessary it is well worth seriously considering acquiring them as it could save you being in a precarious financial position in future.

 

  • 6 month living costs emergency fund
  • Pension
  • Joining a work union (monthly fee)
  • Life / critical illness insurance
  • Work, lost earnings insurance
  • Medical cover
  • Car savings and annual car expenses

 

The next stage is ascertaining your monthly expenses.

 

Assessing spending (current), incorporating paying off debt monthly

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Why Effective Budgeting Empowers Us

It’s a sad fact that millions of people in the UK have just £100 in savings, with the US not far ahead only having $500 in savings. Living without the stability of having emergency savings (typically advised by financial experts as needing to be six months worth of living costs) can have a huge psychological impact. Anxiety, depression and stress can all be symptoms of being financially insecure.

 

Although budgeting may be a scary prospect considering the state of most people’s savings the alternative is much worse. What if you lost your job? Would you have enough savings to support yourself and possibly your children whilst you look for another?

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Budgeting in action: List your current spending on the ‘Monthly Expenses and Savings’ sheet

Over the coming weeks I will talk you through how to fill out the spreadsheet so that you have a detailed and all-inclusive budget which will enable you to achieve all of your life goals and obtain a greater level of financial security than ever before. If your budget changes in any way the formulas have been designed to account for this and do all the working out for you.

 

Firstly you will need to download the spreadsheet by clicking on the button below…

 

Download “Finance-Budgeting-Spreadsheet.xlsb” Finance-Budgeting-Spreadsheet.xlsb – Downloaded 144 times – 17 KB

 

Remember, the aim of this series is not merely to budget, but to budget in such a way that it allows us to achieve our life goals, so, even though you might dread listing your current expenses – it will be worth it, I promise.

 

Monthly Expenses and Savings Sheet

 

As you can see the first tab relates to monthly expenses and savings and is designed so that all potential expenses are accounted for. First of all enter in your monthly salary after tax in cell 3C.

 

Feel free to add or change expense categories to tailor this sheet to your unique expenditure.

 

However if you do add rows for more expense categories remember to enter in the following formula as listed in ‘The Technical Bit’ so that it adds things up correctly:

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Budgeting in action: list how in control of your goals you feel

To me budgeting is just another way to empower ourselves towards a secure future and the fulfillment of our life goals. So how in control of your goals – financial or otherwise – do you feel?

 

To help you answer this question, rate the following five statements, scoring yourself between 1-10, with 1 being completely true and 10 being completely false.

 

  1. I have not officially written down my financial and life goals
  2. I have not considered or researched how much my goals will cost to fulfill
  3. I have not broken down my goals into manageable and tangible steps
  4. I have not created deadlines for either my goals or there interim steps
  5. I have not allocated time towards working upon my goals on a daily or weekly basis

 

If you score more less than 25 you have little control over your goals and can greatly benefit from closely following this series and doing the practical exercises – as well as reading my article on goals titled ‘How to Turn Your Dreams into Reality’.

 

If you score more than 25 you have moderate control of your goals but you will gain a greater level of mastery by following this series – as well as reading my article on goals titled ‘How to Turn Your Dreams into Reality’.

 

If you score 35 or more you have a good level of control over your goals, though to acquire complete goal mastery you could fill out the exercises for the downloadable spreadsheet and read the posts – as well as reading my article on goals titled ‘How to Turn Your Dreams into Reality’.

 

Remember working towards financial freedom means turning your dreams into reality – what could be more worthwhile than that?

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Why spending could be damaging your dreams; How to create a budget that supports your life goals Part One

Photo courtesy of Shutterstock

Photo courtesy of Shutterstock

 

When I was younger my dreams seemed so far away. I realize now that it was just that I didn’t fully understand how to make SMART goals, goals which were broken down into manageable and realistic steps. One of the things that always used to stop me achieving my goals back then was the money it invariably took to achieve my ambitious plans.

 

Today I ensure I account for the money each goal requires in my budget, having done research into how much it would cost and working out how long it would take me to save for it in turn. I then incorporate how long it takes me to save for each goal into the deadline for the goal itself. This holistic approach to goal setting has served me well.

 

In this series I’ll walk you through how to prevent spending damaging your dreams by helping you to create a budget which supports your life goals. Let’s get started!

 

How spending could be damaging your dreams

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Budgeting Myths Debunked: Budgeting is Hard

If you can add and subtract, trust me you can budget. If spreadsheets fill you with fear, fear not, I’ve done one for you all you need to do is fill it out. Budgeting really is so much easier than the majority of people believe. It’s just a case of figuring out how much money you have to work with, what necessities you need and then Probably the hardest part is being realistic, but research into how much things cost and your experience of how much it costs (like food, for example) will ensure that you budget so as to spend smarter, saving more and yet remaining realistic.

 

The tricky part is when it comes to implementing the budget but with a few techniques effectively sticking to your budget can be achieved (more on that later in the series).

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Budgeting Myths Debunked: Budgeting is Boring

I know probably no one has told you this lately but budgeting can actually be fun. Sometimes even really fun! Essentially what you are doing is ensuring you have enough money to achieve your life goals (do I hear a ‘yes please’?), prepare so you will be ok if the unexpected happens (who doesn’t want piece of mind like that?) and plan for the future (so you’ll be financially fit no matter what the future holds; studying, marriage, kids, retirement).

 

Creating a budget is really planning your future as you want it to be, what could be more fun and exciting than that?!?

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