We know that many people budget daily, weekly or monthly. For our customers, budgeting is a way of life and many know how much comes in and out of their account by the penny.
How you budget can be dictated by how and when you get paid, but have you thought about looking at your finances for the whole year?
Budgeting for the year helps you understand when the difficult periods may be for your finances and helps you to budget accordingly. Our customers call the difficult periods their ‘bumps in the road’- the times when money may be tighter than normal.
Instead of living month by month, you have a plan for each month that takes into account your difficult periods and can help you save for these periods to reduce their impact on your cash flow.
Where To Start
Budgeting for the whole year is daunting. The first step is to get a calendar and look at where there are obvious spending seasons. For example, Christmas and Easter are times when you spend more money, as well as back to school for families and the summer holiday months. Mark these down on your calendar in a specific colour.
Next, look for more months that could prove difficult for you financially, such as months that have a higher number of birthdays, dates when quarterly bills or car servicing & MOT’s are due or even dates of weddings or holidays you have planned. Mark these down in the same colour.
Next, think about your spending habits. Do you find yourself strapped for cash during the summer months? The more you think about your spending habits the more you’ll notice when you’re strapped for cash and what you spend your money on. Whatever you find, mark these down in the same colour.
Make A Plan
Your calendar should now show you where your ‘bumps in the road’ are. You can also see where your quieter months are and how these fall, are there a few quiet months before a spending month? If so, you could try to save more money during these months in preparation for the expensive ones.
Work Out Expenses
It’s now time to add up how much your bumps in the road will cost you overall. For this, you may need to use past statements to see how much you spent last year on regular expenses, make a note of how much they cost and how regularly they occurred.
To work out how much they’ll cost over the year, add these up into a total and divide this by how many pay days you have. For example, if you get paid monthly, you divide this total by 12. If you get paid weekly, divide this total by 52. You will now know how much you’ll need to save each month to cover these expenses.
Remember, you have already identified not only your busy months but your quiet months also. You can use these quiet months to save for the busier months ahead.
Look At Your Year
You’ll now have a fuller idea of your financial year- where your expensive months are, where they fall and also where your quiet months are. There may be some quiet months where you can afford to save a bit more and you know where your busy months are so you can prepare for these. Doing this can help when unexpected expenses crop up.
We have a list of budgeting tools here that can help you keep track of expenses.