How To Invest In Your Future With A Solid Budget

Making purchases and spending money is easy to do, and you don’t even need to leave your house. And life is pretty damn expensive from general living costs to anything ‘fun’ you may want to do. And while things like house prices are increasingly massively wages are not going up at the same rate. So having a solid budget and knowing where your money is going is very important. It’s important both for the here and now, but also for your future.

I am a big fan of spreadsheets and looking at data and working out where I can reduce spending/ up our savings etc. But I know not everyone is the same. But here are some ways you can create a solid budget to live better and be able to invest in your future.

Create a solid budget by understanding your spending

You might not want to delve into your spending but it’s so important to be honest and know where you may be overspending. Knowing where you spend your money will help to shape your budget as you’ll know your regular spending and the things you enjoy spending on. For example if you spend loads of money on takeaways you may want to allocate a small budget for them so you can still have one or two a month as opposed to removing it from your budget altogether. Cutting yourself off from things can be more harmful than reducing spending.

Look back over the past few months and see if there’s any correlation to your spending. Do you spend more on physical items or on going out and activities etc?

Work out the difference between your must have spending and your wants

Rent/ mortgage, car insurance, council tax etc are all examples of must have spending. Even if we don’t want to be spending them. Make a list of all of your must have things that you physically need in your life. Then separate out any fixed expenses that are wants; TV streaming services, subscriptions, your shopping habit etc.

The basis of your solid budget will come from identifying these differences. Note down all of your fixed costs and include any variable costs that you still need such as food, fuel etc. For things like food look at how much you’ve spent in previous months on grocery shopping and reduce it slightly. See if you can shop on that amount and you may be able to reduce it further.

This may also be a good time to audit your bills and policies and see if you can get a better deal now, or when your renewal comes up. Last year we switched life insurance providers for Luke and saved some money. And we both switched from expensive phone contracts to SIM only and paid monthly for our phones from apple. Doing it this way saved us about £15-20 each a month!

Establish your goals for the future

Savings and investments shouldn’t just be done with any leftover money at the end of the month. They should be added into your budget to begin with. Realistically think about how much money you can afford to save/ set aside out of your budget. For you it might be £400 a month. Once you know how much think about your goals both longer term and shorter term and figure out your priorities.

If your priority is to go on holiday later this year, but also to be mortgage free as early as possible you may want to save £100 for a holiday and put £300 into mortgage overpayments. Think about what’s important to you; is it to retire early, buy a house/ car/ hot tub. And factor these goals into the savings in your budget.

When you’re putting your money aside make sure you’re putting it into the right kind of savings account to get the most from it. It might be an ISA, bond, investment of some kind or regular savings.

Only take out credit you can afford

According to The Money Charity people in the UK owed over £1.7 billion by the end of October 2021. And the average debt per UK household was £62,965.  But chances are we’ll all take out some debt within our lives, but it’s about only taking out what you can afford. Having a credit card and making some credit purchases can be good for your credit score, but you need to be able to manage it. If you know you already have the money to pay it off, or you will very soon then fine. But if you don’t know if you can afford it try to avoid the temptation.

Click here for more advice on budgeting from Debt Consolidation.

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