Creating a Budget and Sticking to It

When it comes to money and household finances, in some respects things differ from home to home. However, in one area at least, there is a common need and that is for budgets to be made regularly and cohesively to ward off any chance of expenditure exceeding income, which can lead to debt management problems.

Budgets are an essential part of households' financial planning because it allows you to clearly see what your main expenses and incomes are as well as what can be cut and what can't. At a very basic level it ensures you aren't overstretching yourself and storing up problems for yourself later down the line and offers a simple and easy way for families to see their financial comings and goings. It doesn't particularly matter whether this is done simply with pen and paper or on a laptop, all that matters is that you stick to the basics and make it workable for you.

Be realistic
The first thing to do, ahead of your budget, is to be fully realistic about what you can expect to achieve from month to month. There is no point in being overly harsh on yourself and stressing out too much about your finances but at the same time it's not good to take a laid back approach to finances. Finding that middle ground where you are setting achievable targets each month for yourself and members of your family is key and, while you may not get there overnight, in the end it will be worth it.

Allow wiggle room
Also, when setting your budget, remember to factor in a little bit of flexibility. Don't set yourself a specific amount of money to target such as £100 off the credit card bill, instead it's better to opt for a target of between £95 and £105. This way if you have a month that is either heavy or light on expenses then you can still meet your targets and make headway without causing yourself too much stress and trouble. Not every month is going to have the same level of expenditure and allowing yourself a little bit of room to manoeuvre is a really good idea within household budgets.

Reward/punish yourself
Another thing that many households like to incorporate into their budgeting is offering a treat, or indeed a punishment, if they don't meet their set targets. This obviously needn't be too serious but it could be a case of allowing yourself a treat once a month if you manage to pay so much money off your credit card or energy bill or not doing so if you don't. This adds a human angle to budgeting and provides that little bit of extra incentive to meet the targets you have set yourself.

All these sorts of targets can be quickly implemented into household budgets which is ideal when you think that Christmas is now firmly on the horizon. Indeed, recent research from Morrisons appears to show that many people are looking to take budgeting much more seriously this festive season than ever before. The supermarket found that Brits are planning to reduce the amount they spend on the Christmas experience by an average of £28 per household when compared to last year’s spending. More than a third of families will be looking to cut back on presents while a fifth of families plan to spend a little bit less on items such as chocolate boxes and biscuits, all so as to ease the financial burden.

According to Kevin Mountford, spokesman for Moneysupermarket.com, austerity measures brought in may hit people hard over the Christmas period. "There was a report at the start of this year which said that because of the austerity measures in play, each household would be around about £1,000 a year worse off," he said. "We knew that some of the plans were back-ended and as we move out of 2012 and beyond, we're going to start to see the impact. It is becoming even tougher.
"It is not just low-income families that this is starting to bite as we come into the Christmas and winter period. We're going to have to look a little bit more tightly as we are going to have to improve outgoings elsewhere."

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