Budgeting Tips that actually Work

On this blog, we preach financial resilience and freedom based on Wisdom for long term success – I don’t just preach it, I live out the habits I teach you about as I know they work and testify to them.

But what if you are brand new to managing your finances and don’t know where to start?

Perhaps you are over your head in debt and don’t know how to tackle it?

Perhaps you are wanting to save up for some big purchases like a home or a new car and don’t know how to achieve it?

Perhaps you just want to use your money more wisely each month and really see your wealth grow?

There are many budgeting styles out there, but I wanted to share with you today a simple way to get started and the method that I use as a basis for my own.

My budgeting and financial planning strategy is based off of Wisdom and Knowledge found in the Bible (the greatest success book every written that anyone can read) and I would urge you to try and see how involving God in your finances really does change your life for the better.  After all, our resources come directly from Him so it makes sense to include the Wisdom habits in how we handle it.

Let me add all the financial advice in my blog and posts are purely my own opinion and not a guide for your own life and money.

You must take time to research every option yourself fully before considering them, as this is your money and you are responsible to make it work as smartly as possible for yourself.

Budgeting gets a bad rap sometimes, as people tend to only see the lack of money rather than the abundance.  Budgeting can also suggest restriction but actually it is more like a spending plan ahead of time – the whole focus being that we are financially stewarding the resources we have so that we can add to it over time and keep the same structure.  The world around us is built on order and structure, and this is why our finances should be as well.

Funny how your previous pay cheque wasn’t enough and now you have a pay rise it still isn’t enough?

It’s all about mindset and we are going to change that with these top tips.

// Start from the beginning – What comes in and what goes out your home 

This part could be painful but it is time to get honest with yourself on your current spending.

We have to know where we are so we can know how to get where we want to be i.e. in control of our finances and with a plan for how to spend and save.

Open up your Bank accounts and credit cards and list all your Incomes (including Benefits/Tax Credits/Child support etc) and do the same with everything you spent (Outgoings) in the past month at least.

If you live on a monthly pay check, look over the past three months of Bills and spending and take the average amounts.

So if you spend £40 a week roughly on food, write down £160 as an average monthly food cost.

Do this with everything you have spent money on from your account, even the fun items that you probably shouldn’t have purchased.

//  Think about value of your money in exchange for experience

Now you have a complete list of your spending habits, it’s now time to be honest if you are receiving joy from everything you exchange for your hard earned money.  Some things sadly we have no choice to pay, so of course we have to keep those but look at the spending places that you have some decision power over if you keep them or change them.

Do you really use that Gym membership enough to warrant the expense?

Could you consider working out at home in the morning instead to test and see if you would rather use the money for something else?

Do you really read those magazines delivered each month cover to cover and enjoy them?

Have you tried shopping in different places that are actually better quality and value for money?

Might be time to give it a go.

Remember even on those contracted commitments such as your Gas, Electricity and TV bill – now is the time to haggle and ask for a better deal if you haven’t recently.

Attack every penny you are committed to paying right now and make sure you are receiving the full value of joy from it.

// Budget to Zero if possible at the beginning of the month

// Get your other half and family involved in the budget

// Plan ahead for the major events that make it different

// Make sure the joy in your money is there

// Create a buffer for emergencies or RBs “Random Bills”

// Get Serious and Pay back those Debts 

When you first start to budget, you need to make a concise list of all your Debts.

We are talking all the Credit cards, all the Car payments, all the Store Cards – everything.

Write it down on your Budget sheet – Find out exactly what the minimum amount to pay each month is, then add even £1 more on top and set it as a Standing Order.

I particularly love my 10% Rule for any debt repayment such as mortgages and cars, which you can find detailed in my video below.

My 10% Rule means that I commit to paying the minimum amount on any debt, plus 10% of the monthly amount on top.

With this simple easy calculations, you actually end up paying a little over 1 extra full monthly payment towards your debt a year.

This may not seem like a lot, but that extra payment pays into the principle of the loan or debt (the actual amount you owe rather than the interest payments).

This act alone on your mortgage of 25 years, for example, will reduce it down to 22-23 years without too much effort and shouldn’t put you at risk of any over payment charges from the bank (always check with your bank before setting up repeat over payments of course).

Did you know if you pay back the Minimum amount only on a Credit card Bill you will likely pay close to DOUBLE the original cost of the item or MORE over sometimes up to 25 years (if they will let you).

By paying back more than the minimum, you are paying into that debt – SO THROW MONEY AT IT and this should be your TOP PRIORITY.

//  Place Generosity and Giving as a fundamental spending habit every income – the Tithe and Giving

This principle is straight from the Bible as a Commandment (Malachi 3 verse 10) where Christians are encouraged to be giving at least 10% of their total income every time to churches or where ever God tells you to give your “tithe” to.

This principle to start applying in every budget and income is usually the hardest for most people, as it takes a change of mindset from “this is my money” to “God gave me this money”.

When I first started to Tithe as a Christian, I found it challenging but then I have been doing it on every income from my business and personal life every since as I know that it is honouring God and giving Him back resources that came from Him anyway.  He gets to let me keep at least 90% of it for what I want to do.

I encourage you to “test and see” how the tithe will change your financial life and success – I have been through some very challenging financial times and still continued to tithe and give based on God’s instructions to me and we never once went without a meal or a bill paid.  God ensured we were looked after even when the income seemed too low to support the bills and food we needed.

In your next budget, include that 10% minimum Tithe as the first deduction in your spending and it will change your financial journey and mindset more than you will realise at the moment.

// “Double down the Debt” one at a time

One of the most powerful things you can do for your debt and money management is changing the emotions and the way you feel about money.

I like to play a game if I can with my money, and I call it “Double Down that Debt”.

On a piece of paper or on your budgeting spreadsheet, list all your debts.

From this month on, pick one debt you want to play a game with for fun.

The game is to “attack it with double the punch” and we are committing to making double the payment to it for this month onwards until it is cleared.

You will certainly be giving that debt a piece of your mind and saving yourself some major interest payments in the process.

Obviously be sure to check with any loan payments that you won’t be hit with any charges, but generally they are fine with over payments up to a certain amount a year.

Perhaps try a smaller debt such as a credit card or car payment, but it would also be a great place to start at looking at the debt that (outside of your mortgage) generates the largest interest payment in £ for you each month.

The sooner that debt is gone the sooner the money is back in your pocket after all.

// Use the Drip Feed Method to move towards your financial goals easily

There is a wonderful phrase that goes along the lines of how is it you cook a frog?

You don’t place the frog in boiling water, you place it in cold and slowly increase the temperature so it doesn’t notice the difference.

In a round about way, we are creatures of habit and once you now are in the habit of budgeting, saving and making your money work smarter, it’s time to turn up the heat and power.

I call this the “Drip Feed Method” and it is little by little we are going to amplify our habits to new levels that will rapidly change your world to financial freedom.

Start by applying the 10% Rule mentioned above to your debts and investments/pensions for your future.

Before we start, we all know that generally we receive pay rises every few years or we start new projects as our mind becomes aware of the possibilities in the world, and so the wage we have right now will not be the same for life.

In the Drip Feed Method, every few months increase your debt repayments, savings and investments by 10% more.

So if you are currently at 10%, increase it to 10% more or 11% total on each.

Then after a few months more, increase a further 10%, so now 12.1% total compared to when you started.

If you did this, over a year you would move from 10% to 14.65% roughly so not a huge shift once you are in the mindset of using your money in this way, also made much easier to deal with should a pay rise appear that next year also.

If you took the Drip Feed Method and applied to to not only your debts, but your investment savings you would actually reach financial freedom much quicker than you would have previously though.

Using a compound interest calculator tool to approximate the time, if it was to take you 20 years to reach financial freedom and auto generate an income matching your current one right now, using the Drip Feed Method would drop this down to 10 years.

That assumes of course you would receive about 10% year on year growth on your investments, which isn’t uncommon in recent years.

The power of the Drip Feed Method can change your life, if you allow it to.

// Review Regularly to set on the correct path again

Life happens and anything can come your way and alter your course without warning.

Make a commitment to regularly review your budget and spending, to be sure your habits align still with your goals for financial freedom or even just in life in general.

Take time each week at the start to review your spending and saving, and then move to at least once a month to make sure you are celebrating the successes as they come along or noticing where you could do better.

// Summary of a Smarter Budget

1. Get clear on what you are earning and what you are spending
2. Look to see if your spending matches your joy and value currently
3. Tithe and Give a minimum of 10% – this is a commandment and changes your heart and mind, as well as your finances
4. Eliminate or haggle for better deals
5. Use the 10% rule on your Debts if you can afford it to get rid of the debts even quicker
6. Start investing with the 10% Rule in your Pension and future
7. Double Down on your Debt Game
8. Use the Drip Feed Method to really rocket your wealth
9. Keep reviewing regularly to set the course on the right path again

The real secret to financial success?  Give away 10% minimum of your income every month if there is only one new habit you take away from my blog post.  I am a Christian and I believe in the Law of Tithing, which means I give away 10% minimum of my monthly income to a church or community that I believe will create change in the world as a result of my donation.

One financial principle that I have applied even when financial times have been tough has been this principle, and it has ensured that my family has enough resources always. I urge you to read more about this Law from the Bible and apply it to your own money and even business income as well.