December 28, 2022

Why I write a budget each year

In 2009 I was unhappy in a job that had made me very ill.  My dream was to give up work and retire early but unfortunately I was in over 70K debt, including my mortgage.  I had a car loan, credit card debts and a £55K mortgage.  To help me reduce my debts I set myself a budget for the first time for years.  I had just been ‘winging’ it for about 5 years as I was on a good wage and felt that I could easily make repayments and did not realise that my outgoings were actually higher than my income.  Being ill changed all that as I was being threatened with losing my job.

Now a lot of people see budgets as being boring or frightening.  I used to.  I hate maths but there are now apps, spreadsheets and tools on line that will help you.  Being tech phobic and old I still prefer to make a budget with a pen and paper.  Budgeting is a really positive thing to do as it helps you reach your goals.  Try to visualise your goals before writing your budget as this will help.  My goal was to retire early and I went from being in a lot of debt to having no debt and having savings in less than 6 years by having a budget, regularly reviewing it and sticking to my financial plan. I retired early in 2015 at the age of 54, despite having been a single parent for most of my adult life, having worked in a minimum paid job until I was 35 once I had children, and not having any savings or benefactors.  Your plans may not be as drastic as mine and might involve saving for a new car or a holiday or getting your teeth fixed.  If you have a budget you are more likely to reach those goals.  Here is a break down of how to write a budget.

  1. The first thing to do when writing a budget is to find out your income.  This is every penny that is coming into the house from things like benefits, work, a side hustle, child support etc.  If it is different every month work out an average over the last 3 or 4 months.
  2. Go through your bank statements and list your debts. Write down your minimum payments for all your debts. (if possible find out how much you still owe on all your debts and try to change them to interest free if you are able to)
  3. List all your fixed expenses and work out the payments you will need to make for these each month.  These include things like food, your utilities, insurances, rent or mortgage, your phone,  transport and fuel etc to work. You will be able to work these out from looking at your bank statements
  4. List your non essential, flexible, expenses eg subscriptions like Netflix, take away or eating out, leisure, self care, clothing etc.  Are there any suprises on your bank statements that you could get rid of? I had a washing machine insurance that I couldn’t even remember taking out.
  5. Set a £50 budget as a buffer if possible to use for unexpected expenses like a birthday gift, extra petrol needed for an unplanned journey. It was also my guilt free budget if I wanted a bar of chocolate or to meet a friend and have a drink and a piece of cake.
  6. Now add these up.  Hopefully your expenses will be less than your income with some money spare for savings to build up to fulfil your dreams, to build an emergency fund or to pay off larger amounts of your debt.
  7. If your outgoings are more than your income than you need to find ways to cut your expenses so that you are living within your means.

Once I had done my budget I realised that I was wasting a lot of my money on clothes, food, leisure and shopping for things that I did not need.  My fixed expenses were actually less than half of my wage and yet every month I had been getting more and more into debt and living pay cheque to pay cheque.  I tracked my expenses for a month and made the decision to only spend mindfully and to cut my food budget and any unnecessary spending.  I didn’t deprive myself fully.  I still went on a holiday, I still bought some clothes and I still had some fun and entertainment but I made sure they were things that I really wanted and that I was not just shopping because I was bored or because I thought that it was a bargain.  If I wanted some thing expensive I worked over time to get it or I sold something.

As the months went by my stress reduced and I enjoyed watching my debts go down and my savings increase.  I reviewed my budget every month and any monies I had left in my bank account on pay day I would either pay off debt, put into an emergency fund or pay off my mortgage.  I was spending less but felt richer than I had ever done.  As my debts reduced I found I had more choices as I had more free money.  This enabled me to save to buy a car and a log burner before I retired.

I still write a budget, even though I can track my expenses in my head almost now.  My budget will alert me if I am going off track as I review it every month.  It also continues to help me stick to my financial goals which are more about affording breaks away now.

Do you have a budget?  If not what is stopping you writing one?  Some times it feels easier to bury our head in the sand which is what I think I did before 2009.  I was depressed and did not think that I could cope with looking at my income or my debt.  I sorted my finances out for myself but every year over 100,000 people in the UK attempt suicide due to debt and yet there are plenty of organisations like Step Change and Citizens advice that will help negotiate with your creditors and have interest frozen if you ask for help.  A lot of people are too embarrassed to ask for help and feel ashamed.  There is no reason to feel ashamed as we have been encouraged to have debt.  Even though my income is extremely low I still get offered credit now which I would never be able to pay off.  How about writing a budget for the new year so that you can start planning your dreams, or at least have the knowledge to know if you are living within your means or need to earn more or make cutbacks.


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  1. Phyllis Sharp December 28, 2022 at 7:00 pm - Reply

    Very relatable post, especially the work thing, change is a mindset and I’m getting there slowly, thank you x

    • ToniG December 28, 2022 at 8:43 pm - Reply

      Thank you. With your organisational skills you will get there x

  2. Kathryn Naden December 28, 2022 at 8:06 pm - Reply

    This is great & I am keen to follow your example . You say you use pen & paper as I am equally techno phobic do you have a template you could share I was wondering if I should try a ledger or really bite the bullet & address my techno phobia.
    Thank you once again .

    • ToniG December 28, 2022 at 8:46 pm - Reply

      No I don’t sorry but there are plenty of examples on line. I basically go through my bank statements and all the direct debits are on there and the purchases. It is important to include in your budget things like the MOT and servicing of a car or a TV licence if paid annually and put money away in another account called a sink fund for those. This for things that need doing annually or will need replacing periodically.

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