Even though I’m self-employed I still pay myself once per month on the same payday as my husband. I find it much easier to manage our income this way as before doing this we were simply spending my cash as it came in and not budgeting properly at all. It’s surprising how easy it is to spend dribbles of cash at local supermarkets and it disappears before you know it! In this blog post I am going to share some tips on how to properly budget and manage your salary throughout the month.
Set all your direct debits to the same monthly date
This tip will make things so much easier when it comes to budgeting for the month ahead. If you have bills coming out on all sorts of different dates then see if you can change the payment date so they are all the same. You want this date to be as close to your pay date as possible, but never before it.
We get paid on the last Friday of each month, so this could sometimes be the very last day of the month, but sometimes in the early twenties of the month. To ensure we have always been paid before the bills go out, we have set as many direct debits as possible to go out on the first of each month. This means we’ll always have been paid before we pay our bills and can then see what is left for the month.
Unfortunately some companies can’t change their payment date which is annoying. Our council tax, for example, always goes out on the 5th of each month and we have another five bills which can’t change the payment date. It’s frustrating, but by keeping a record of our incomings and outgoings I know to expect each bill which leads me on to the next tip…
Don’t be surprised by your outgoings
To budget properly then you need a list of your incomings and outgoings each month. If you are unsure of the amounts of your outgoings then go back through your bank statement to find all the figures for your monthly bills. List all these outgoings somewhere that you can access them each month. I prefer to use a spreadsheet as I can edit it every month easily. You could use a notebook, pen and calculator if you prefer.
I keep a list of all our outgoing bills that must go out each month and the amounts cannot be changed. I then total these up.
Next I keep a note of our incomings. Ben gets paid the same each month so that’s easy, but my pay fluctuates. I therefore note down my pay as a very rounded down version so I know I will always get paid at least this.
Then I calculate our incomings minus our outgoings (the set bills) to see what’s left.
Then we take off food, fuel and savings.
I do these separately as we could spend less on food if we needed to. So if we have a surprise outgoing one month, then we’ll reduce our expenditure on food or not put any into our savings.
Then what is left is our spending money for the month.
Once you have your spending money allocated for the month, it’s really important to stick to it. If you overspend then that’s when you’ll start dipping into your savings if you have some, or going into your overdraft or paying on your credit card.
One great way to prevent this is to take your spending money out as cash. This way you’ll easily be able to see exactly how much you have left for the month. It can also be harder to part with cold hard cash than it can be to simply pay with plastic which can often feel like free money!
If it’s four weeks until next payday then divide your spending money into four and try to stick to a weekly budget.
This requires discipline! If you run out of cash then tough. You have to wait until the following week or the next payday. This is the only way you won’t overspend.
Why not challenge yourself to underspend instead? Have a no-spend week and then you can either save the saved money or have double the budget the following week!
Treat savings like an outgoing
No matter how much you earn, it’s really important to put some aside each month. This is not for a rainy day, but an emergency! If your car broke down and you need to pay hundreds for a repair could you afford it? What if your boiler breaks down? It’s so important to sacrifice spending all of your disposable income each month on yourself and to instead set some of it aside as an emergency fund.
The best way to do this is to treat your savings like a bill each month. Decide on an amount that is reasonable and affordable then pay it to your savings when all your bills go out. Treat it like a bill. Pay it and forget about it.
Not only will you be safe in the knowledge that you have some money as a backup for an emergency, but you will not need to get into debt when you have an unexpected bill.
Need more money? Make more money!
If you need more money for the month then there are plenty of ways you can make money at home to get you through to the next payday. I share numerous ways to make money online and using mobile apps on this blog. Check out my menus at the top of my website for inspiration.
One of the fastest ways to make more money is to sell your unwanted items. Just last month I made almost £120 just on Facebook Marketplace by decluttering our attic. Many of the buyers came the same day and the money was straight in my pocket!
Seek help from your employer if you are struggling financially
If you are struggling financially for the month, then you have several options before resorting to a high cost loan or other high interest borrowing that could put you in a worse financial position. Firstly, ask yourself if you desperately need the money. Is it a necessity or a want? Can it wait until payday? Can you make the money yourself?
Of course you can ask friends and family to borrow money if you really need the cash before your next payday, but don’t forget you can always ask your employer. Some employers have financial employee benefits in place such as pay advances whereby you can access your pay as you earn it instead of waiting until an end of the month payday. They may also be able to lend you money which you then pay back via your salary at a much lower cost than your bank.
When we had our second child and the maternity pay and our savings ran out, we did struggle financially for a short period of time. Things were really tight and so Ben went to his HR department and said ‘I need more money! What can you do?!’ They were able to stop his pension contributions for a few months so we could get back on track. It was only for three months but it was exactly what we needed to get our finances back in order. Most people struggle financially at some point in their lives, so don’t be afraid of asking your employer if they have a solution.
Cut costs to improve your budget
The great thing about tracking your expenditure is that you can see where you are spending too much money and start to be more sensible about your outgoings. Take a look at your bills to start with and see if you can save any money there.
When we did this we realised our broadband bill was really high so we called Virgin and said we weren’t happy. They hadn’t given us a discount for years and agreed to cut our bill by around £11 per month! That was a saving of over £100 per year and all we had to do was ask.
We also switched energy companies and saved ourselves £264 per year! Read 100% renewable energy, £50 credit & cheaper tariff than Big 6 to see how.
Work your way through your outgoing bills and see if there is anything you can switch or negotiate to save yourself potentially hundreds over the coming year.
Budgeting isn’t as scary as it may first seem and it’s a very sensible way of being in control of your finances each month. You can avoid using credit by making your salary last all month with a bit of planning and will power.