Step 3: Take action. Make changes
The good news is, there's a wealth of help available, and you may be able to start making changes now. Breaking those old habits is the only way to create sensible new ones that will help you achieve your financial goals.
Your action plan:
- Separate your essential and non-essential spending - so you can see where you can make savings.
- Identify where you can make savings – could you reduce the cost of your weekly food shop? Or going out? Switching to another utilities provider could save you money too.
- Look for ways to save without suffering - you'll be more motivated to cut back if it's not going to have a dramatic impact on your lifestyle.
- Priorities your spending - if you don't pay your mortgage or rent, you could lose your home. If you don't pay your gas bill, you could get cut off.
- Set yourself realistic targets - don't try to make too many big changes that you won't be able to keep up. Even with a few small cuts, you'll start to see a difference.
- Repeat at least every 6 months - things change, so review your budget every few months and see if there are other ways to make your money work harder
A few practical tips to get you started:
- If you usually buy lunch from a sandwich shop or cafe each day, try making your own, if not every day, then at least 2 or 3 times a week. See the cafe days as a treat.
- Likewise, if you grab a takeaway coffee on your way to work each morning and pay around £2, that's over £500 a year. Try getting one every other day, or as a Monday and Friday treat. Or switch down to a smaller size.
- Think twice before making any impulse purchases. Do you need it? Or do you just want it? Either way, it's worth going away and doing some research to see if you can get a better deal, or saving until you can afford it. You'll feel like you've earned it then.
- Could you save money on your bills by switching suppliers for your energy, telephone, broadband or paid-for TV? Use a comparison website to check you're getting the best deal.
- Have a night out - in. This is a big saver if you have kids and usually have to pay for a babysitter. Instead, buy something special to cook, have a bottle of wine, maybe even dress up for it. It'll give you a chance to try some new recipes too.
- If you're paying for insurance policies, check you're not doubling up on cover. If your home policy covers your personal belongings away from home, you may be able to go for cheaper travel insurance. It's also worth checking if you're entitled to free insurance through your bank account, or reduced rates through work.
And remember...
A budget isn't about telling you to stop spending money. The opposite in fact. It's about helping you to spend more effectively, and in areas you want to spend it. Use it as a positive tool to help you control your money rather than letting your money control you.