Old-school budgeting methods for the 21st century
While there’s a plethora of smartphone apps and websites for helping you to get your finances under control, for some of us, we’ll never really take to this new technology. It’s also true that for many of us, manual methods of doing things just works better.
That’s why it’s worth investigating some old-school budgeting tips that you just might find work better for you than anything new technology can offer.
Paper and pencil
Sometimes the simplest methods are the best and when it comes to budgeting, nothing beats a pencil and paper for feeling like you’re actually involved in your own budget process and not just handing it over to a machine algorithm.
It’s as easy as starting a notebook specifically for spending; just physically write down every purchase. The very act of writing the same thing down every day, like £5 in a coffee shop every morning, can jolt you out of the habit.
You can just list your expenses as you make them, or you can create a table of matrix that shows categories and the spending totals in each if you’d like to drill down on your behaviour even more.
One sure-fire method for keeping you on track is to keep a running total at the top of the page of how money you have left; just stick in your income on the first page and with each new page of transactions, subtract the total. You’ll soon start to see these numbers go down fast, which is an excellent way of keeping you on track.
Use cash, not cards
This old-school method can be a tricky one; many of our transactions take place online which makes lifting your wages as cash difficult. However, it can be done. The advantage of working with cash is that you see yourself physically handing over the money; with cards, there’s always a bit of a disconnect.
One way to make this work for you is to continue to set up all of your bills online, then lift a set amount each month for general spending. Once you’ve withdrawn this money, put your card away somewhere that is safe, but which isn’t within easy reach. You then have to only spend what you physically have on you in cash.
That will soon get you thinking frugally; if you’ve only got £50 in your pocket to last you the whole week, it’s highly unlikely you’re going to be spending on things you don’t need.
Hold onto your receipts
You remember receipts, right? They’re those bits of paper we get when we complete a transaction that shows what we’ve spent. You’ve probably got a wallet, purse or corner of your home full of them, unsorted and in complete disarray, just waiting for that next clear out.
Starting putting your receipts to work; instead of writing down every transaction, make sure you have a receipt for every expense. If you aren’t offered one at the till, just ask. Set yourself some time, once a day or week should suffice, to sit down with all of your receipts for that period and sort through them.
You’ll soon be surprised with your spending when you see that pile of coffee shop receipts stack up. Physically sorting the receipts into categories can quickly show you where you are overspending and where you need to start making changes.
Reconciliation is an accounting term to describe the process of making sure that two sets of records agree with each other at the end of a given period. However, you can use reconciliation for your personal finances, too.
Sit down at the end of every month with your bank statements and your records of spending %28or your receipts%29 and make sure everything matches up. These days it’s rare to get bank errors or unexpected charges, but you’ll catch them with this method.
The real advantage though is that every month you get an overview of your income and expenditure, making you feel like you finally have control of your finances. Doing this every month allows you to track spending and saving over the year, too, and your annual reconciliation should be an opportunity to set new goals and spending limits. You will soon see a difference using this approach to your finances.