One of the very first things that The Money Diet advises is to prepare a full budget of income and outgoings each month. There are companion spreadsheets online to help with this, particularly with annual expenses broken down into monthly instalments. But really, it’s just as easy as dividing the annual figure by 12 (months) or 52 (weeks) and using that.
Everything went onto my budget sheet – first of all, all of the fixed expenses: mortgage, electricity, gas, telephone, mobile phone, satellite television, television licence, home insurance, road tax, internet, water rates, council tax, car insurance, loans, bank charges/interest, credit card bills, etc.
Then I looked at trying to work out expenses that were fixed, such as shopping – some break this down into food, cleaning products, pets, etc, but I prefer to lump it all together.
And then I berated myself what I considered to be “luxury” expenses – pets, hair (grooming), dental fees, prescriptions, books/games. Anything I couldn’t work out accurately, I tried to come up with a ballpark figure for. On joining the Money Saving Expert forums, other users soon suggested I build in these “luxury” items into the budget
On the income side I included wages, birthday money I knew I’d get, any interest on what little savings I had. And once I was sure I’d included absolutely everything, I was horrified to see that I was regularly spending around £400 more than what I was earning. No wonder I was in the shit.
Having this information helped me to budget downwards, cutting out a lot of the “luxury” items. But one of my big mistakes – at the time – was reducing all of my credit card repayments to “minimum payment”. I knew it was the wrong thing to do, but I didn’t know where else to make cuts.
The other big mistake, and probably the worst one, was robbing Peter to pay Paul – withdrawing cash on my credit cards (I had 4 or 5, mostly almost maxed out) to pay the others …
But what else could I do? Especially with a husband who didn’t think it was his place to help. He thought if I needed money I should ask my dad. As I’ve said before, he didn’t last much longer.
The spreadsheet gave me something tangible to work with. It wasn’t brilliant and it didn’t find me more money, but at least I knew where everything was going and maybe where I could make savings.
The first “expense” to go was “pocket money”. And everything else was stripped down to the bare minimum. The shopping was another area, but more on that next time.