Four ways to overcome budgeting problems

| May 22, 2015 | 0 Comments

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Despite online and mobile banking and a move towards a cashless society, budgeting is difficult. One might believe that harnessing the power to see where your money is entering and leaving your account at any time should be enough to keep everything on track, and make any adjustments accordingly. Life doesn’t always work like that though, and things can soon go wrong – here are four common budgeting issues, and how to avoid them.

Problem: You don’t know where your money is going

Solution: For some reason you never seem to have as much money as you should have, and there doesn’t seem to be any consistency to the frequency or removal of funds.

The most likely reason for this is the hidden expenditures in your life; impulse buys at the tills, internet purchases that you forget about, direct debits for charities that don’t seem noticeable at the time but mount up over time.

It’s time to get brutal, and one way to monitor this is to keep all your receipts for a month and tally them up. Split your expenditure into essentials and non-essentials, and hammer down on the latter. Plan meal times in advance and take advantage of voucher offers.

Problem: You don’t really know how much money you have

Solution: It’s time to leap forward into the 21st Century. Mobile phone apps can keep track of income and expenditure in real time, as well as share prices. Some are better than others as this review describes, giving the option of analysing personal and business accounts and also pinpointing branches and ATMs, while others are more limited.

If you can, set up a weekly alert with recent transactions and a notice when your balance drops below a certain level. Then you’ll at least have an idea of where, and more pertinently when, your money is going.

Problem: You can’t save money for big expenses such as buying a house or a car

Solution: If you can’t keep hold of the funds that you have now, then how can you save money for costs in the future? It’s a problematic circle of paying interest charges for current debts, while failing to establish any savings of your own.

The obvious solutions are to get a different job, sell items, or alter your lifestyle in some way. But let’s suppose you can’t achieve this.

It will take one month of restructuring your finances and putting in place a plan, perhaps with support from a financial advisor or a bank manager. The first step is to put in place any direct debits that prohibit late or forgotten payments, while the next might be to consolidate your various payments into one, low-interest loan. This new payment should free up funds elsewhere and maybe enough for a mortgage, but be warned: you’ll have to fulfil criteria from the lenders to be successful. Check out this article from the Money Advice Service to find out more.

Problem: You can’t meet your bills or expenses

Solution: A fixed direct debit, such as a line rental or TV licence bill or insurance premium, should be the same every month and should therefore be factored into any budgeting. If one knows what’s coming, one can prepare.

The problems arise when variable bills, such as electricity, heating and petrol, rear their heads. The Government is intent on getting everyone signed up to smart meters (although many people are unsure about the surrounding online security issues), which should be enough to at least give the bill payer an indication of what they are spending, and why. The usual advice applies; don’t leave things on standby, fit insulation, and so on.

 

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