Monday, April 17, 2017

The Importance of Budgeting

Hello Friend.  Please accept my apology for not having written in almost a month. Life doled out other priorities which required my attention.  But I haven't forgotten you!  I promise. In fact, I have so much I want to share with you and have the chance to do that again.  

I had a really nice conversation with a new acquaintance a couple of evenings ago.  While our husbands were rounding up their conversation... in the car park of a Micky D's... Finding the Pennies somehow came up.  Something she said stuck with me. She said, "Yeah, we (she and her husband) get to the end of the month, and we really don't know what we spent our money on!"  This comment had me wondering how many of my friends, perhaps even you, wonder the same thing, month after month after month.  

This conversation came just a couple of days after the husband of a friend I was speaking with told me that he is down to their last pennies in their bank account, "but I haven't told her that yet."  My heart goes out to this family.

Friends, please be honest with yourself.  Do you know where each and every penny you spend goes every month?  Would you like to begin each month with a greater feeling of control over your finances? 

You most likely know where I'm going with this.  The only way you can have greater control of your spending is by keeping track of each and every penny you spend.  "Come on, Lauren, who has time for that?" you may be asking.  "You do!" I reply.  "But that takes a lot of effort," you may then be thinking.  Not really, and the effort you do put into a creating and following a budget is more than worth it.  

By following a budget, you can tell your money where to go.  By allocating your income at the beginning of the month, you have the ability to control how you will spend your money before you make a single purchase.  This is so important so you know how much you have to spend in particular areas of your life.  Some may see this as being quite restrictive; however, I see this as opportunities to spend my money in a way that optimizes each penny spent.  

But why do I even follow a budget?  My main reason for following a budget is peace of mind.  I know that a) we will have enough money to cover all areas of our life, b) if there is an unexpected expense one month, we already have some or enough money saved to cover that expense.  In addition, it allows my husband and I to have the ability to better communicate about upcoming expenses and be able to plan for them. 

I want to share with you how we allocate our money each month to help you identify where your money may be going.  There are basic areas we allocate money to: groceries, mortgage, utilities, fuel, and insurances.  There's regular monthly bills that aren't fun, but are necessary: council tax, health expenditures (prescriptions, dental examines, etc.), and bank account fees.  Then there's some monthly bills at are fun or optional: cable television, tv licence, mobile phone contracts, window cleaner (house cleaner, if you have one), entertainment/play, restaurants, gym membership, and clothing (I know clothes are necessary, but perhaps this one can go between the necessary and fun/optional category depending on what is considered a "need" or a "want"), hair cuts (again, a need vs. a want), and professional membership fees. We even have an "other" category, that we can't really plan for because they don't always happen but do come up most months, like car parking and posting letters and packages.

Not only are there monthly expenses to take into account, but also annual payments that we save for each month so that when the bill comes, we're prepared. These include: neighbourhood maintenance fee, boiler service, vehicle tax, MOTs, vehicle breakdown cover, vehicle servicing, and National Trust membership. There are also annual events that happen that we save for monthly: Christmas, birthdays, and holidays.  We also budget for eventualities, things that we don't know whether they'll happen, but are likely to, for instance: house expenditures, vehicle servicing, new vehicle purchase, school expenditures, and gifts for others that doesn't fall into the "birthday" category.

We save for far in the future events such as our daughters' higher education and retirement outside of work pensions.  One area I haven't mentioned yet - yes, there's still one more - and this one is very important to us, is tithing and charitable giving.  As Christians we believe that a tenth of our income should be given to our church and the work of Christians worldwide (missionaries and Christian charities).  We also allow for charitable giving in our budget when the need arises, such as when friends or family participate in sponsored fund raisers or when a friend could use "a little extra" to help them get by that month.

Please, please don't think that I am boasting about being able to cover these areas of our life. I simply want to help you to identify where you can be allocating and saving your money, so that you can gain control of your finances and live with a greater peace of mind about today and tomorrow.

Ok, so you don't have a budget or perhaps have a rough outline of your budget.  I am not a qualified financial adviser, but I know that by following a budget, your finances will improve.  In my next blog, I want to help you to create a better budget.  Until then, just start by getting out a piece of paper and a pen.  Write down how much money comes in each month from your and your spouse's salaries, child benefit, and other places.  Then make a list of as many expenses you can think of or follow my lists above to outline where you spend your money.  This in no way has to be perfect.  If you want, put an exact amount or a rough estimate of what you think the expense is next to each item.  That's it. 

Friend, I know this is a sensitive subject, but I care about you, your family and your future. 

Take care xoxo

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