Food, Clothing, Shelter?
Remember being taught at school that the essentials for life were food, clothing shelter? Well, it’s still fairly true even in today’s society that we need to first address these needs when planning our budgets. We need to pay the rent or mortgage, for most of us that’s a fixed, predictable sum each month. Food is essential, but its not just a case of eating whatever is cheapest, we need to plan for a balanced, varied, healthy diet if we want to get the best from life, so taking some time to work out a realistic food budget that allows for this is important. Clothing may seem like an area where it’s easy to cut back on spending, but think carefully about the items of clothing you have had the most wear from. Often, it’s that well chosen investment garment that gets the longest wear, rather than a cheap t-shirt that lasted two washes then curled up and was unbearable. Be prepared to work out how many times you are likely to wear an item of clothing and balance that against its cost. Better to have a smaller wardrobe of well made, versatile items that will go for years, than a room full of cheap, badly made and unreliable items. Work out realistic budgets for these three areas and you are on track to knowing your core financial needs.
Now look at taxes, rates and other unavoidable.
Our lovely logical budgeting above is complicated by all the taxes, insurances and so on that get layered on top. Living in a modern society we have to accept that our homes need insurance, that the car needs road tax, that we have rates to pay and so on. Again, many of these are predictable so we can work out how much money actually goes on them. Don't forget to allow for health cover etc.
Tidying up behind ourselves and planning for the future?
We are bombarded by media telling us that we need to plan for our future, but we also need to deal with our pasts. If you have any debts at all, it makes better financial sense to deal with those before you start saving for the future. You'll get more for your money if you aren’t paying interest on old debts. Even a small amount put aside for this purpose each month will quickly make a big difference and its great for your peace of mind to know that you are tackling this area.
But what about fun?
Of course we need to have fun, but often we spend disproportionate amounts of money on entertainment because we haven't thought things through. If you have allowed for all of the points above in your budget, then you should be able to see how much money you have left from your regular, predictable income for the fun things in life. Knowing how much you can afford to spend may mean you have to make more active choices, picking between several quick fix things like a takeaway or a cinema trip or whether to plan for a bigger treat once a month. We all have different lives, one person's longed for knitting wool is another person's ticket to a big sporting fixture, but if you know what you can spend whilst staying within your means, the pleasure becomes guilt free and so much nicer.
