Proper budgeting is essential to ensure we’re living within our means, but poor financial choices see many of us living payday to payday. There has been a drastic rise in the number of us who ‘skip meals, go into debt, avoid paying bills, and put off replacing worn-out clothing’ in recent years, suggesting a strong need for more support, assistance, and education surrounding household budgeting. Here are 5 useful tips to make cost allocation simpler and more straightforward:
1. Utilise Online Budgeting Resources
Shocking statistics suggest that relatively few Brits know exactly how much money they have available to them, and, as a nation, we’re much more likely to overestimate our financial resources than underestimate, with the average person magnifying their balance by £70.73. This means many of us are guilty of spending money we don’t have. It can really help to see a complete overview of finances when trying to budget more appropriately, and online resources that display these details in black and white can be a beneficial step in making changes.
2. Determine a Monthly Budget
It’s reported that the average household spends £483.60 per week – covering everything from groceries to mortgage payments – but this figure may be too high if you’re living on a low income or variable income. Experts recommend that one quarter of your available monthly funds should be spent on housing, with 5 percent on clothing, 10 percent on utilities and phone, and 12 percent on groceries and dining. Breaking down a budget into categories, and allocating funds between these categories, is one of the best ways to determine a suitable budget.
3. Cut Down & Downshift
Research indicates that the average Brit spends a whopping £1,320 on fast food each and every year, and many of us are guilty of spending more than we really should be, particularly when it comes to eating. Cutting down on unnecessary luxuries like takeaways, and ‘downshifting’ – purchasing supermarket-own brands rather than globally branded food – can have a significant impact on finances, and can free up a percentage of the monthly budget to be allocated to other categories, such as home improvements, educational resources, or even family days out.
4. Only Spend What You Have
An estimated 63 percent of 18 to 30 year olds don’t own a credit card – not because they’re failing to get approved for credit, but simply because they don’t need them, or would prefer to use alternative payment methods. Credit cards can, in some instances, promote overspending, leading to poor credit ratings and financial struggles in the future. Instead, the popularity of prepaid credit cards is rising, particularly in the UK, encouraging Brits to spend only what they have, advocating good money management skills, and reducing overall financial risk.
5. Have an Emergency Plan
Figures from the United States suggest that more than half of people – 62 percent to be exact – cannot afford to cover unexpected expenses that may pop up – this could include everything from car repairs to vet bills for the family pet. Having an emergency plan is essential, and believe it or not you can have an adequate plan in place even if you don’t have savings. Peer-to-peer lending, poor credit history loan providers, and non-status lending are all becoming an accepted method of funding unforeseen costs if you need access to cash in a hurry.