Living on a tight budget is something most of us have had to adapt to – especially in the past year due to the Covid-19 pandemic. Times are hard for many families, and a lot of us have had to drastically reduce our spending.
It’s vital that you manage your budget properly at all times, but never more so than now. Even if you don’t have a lot of money, managing what you have keeps you in control and makes you feel more confident, which is better for your emotional well-being too.
© Gregory Lee / Adobe Stock
Feeling like your finances are out of control? Our handy tips are designed to help you manage a tight budget and weather the current storm…
1. Organising and prioritising
The first thing everyone needs to do is organise their income and expenditure and prioritise the most important debts. The question is, what can you live without?
Research revealed one in five people were already living in poverty in the UK in 2019, before the pandemic struck. The study by the Social Metric Commission found two-thirds of employed Brits had suffered a drop in income in 2020, due to redundancy, being furloughed, or a change in hours and earnings.
Further research on 3,000 families living on benefits found 70% had reduced spending on toys and books for their children in order to buy food, while 50% had found it necessary to cut down on food spending. Now, 10% of the UK population is living in deep poverty.
If that sounds anything like you, it’s time to sit down and write a list of what’s important. Of course, the most important things are paying the rent or mortgage, buying food and paying utility bills and council tax. It depends on your budget and personal spending habits as to what questions you need to ask.
You can find ready-made budgeting sheets online to help organise your finances. Write everything down on your sheet – be thorough and honest with yourself, so you know exactly where your money is going.
2. Online banking
Maximise the benefits of online banking. It’s easier to stay organised when you have instant access to your account, so you know exactly how much money you have. Every leading bank has online banking and a mobile banking app, making it easier to get in control. Make the most of these or other similar apps that help you to track your spending.
Currently, 80% of people in the UK use their bank’s online services – three times more people than in January 2019.
3. Borrowing money
When times are hard, it may be necessary to borrow money from a lending service to tide you over, especially if you have a sudden emergency and need cash urgently, such as a household repair.
Taking out a short term loan can help you to recover from a difficult temporary situation. When you’re looking for a loan, always choose a responsible lender, who will help you to assess whether you can afford the repayments. A logbook loan allows you to borrow money secured on your vehicle – you can carry on driving it while you complete the repayments!
If you borrow money, make sure you include the repayments into your budgeting too. Don’t take out a loan if you’re unsure whether you can pay it back.
4. Planning
Always consider your forthcoming expenditure. For example, make a note of payday, so you can ensure there is enough money in the bank to cover the important direct debits.
While you might want to avoid making a note of everything, as it can be scary to consider how much you need to spend, planning ahead will help you to plan your budget more accurately.
5. Small savings
Small things matter when you’re living on a tight budget. It’s too easy to spend a few pounds here and there without really noticing, but doing this frequently makes a big impact on your budget. Ask yourself, do you really need to buy a coffee?
If you buy a cup of coffee from a takeaway every week day, at an average price of £1.50 per cup, this adds up to £7.50 a week, £30 a month, or £360 a year. Is this something you can do without? Okay, maybe you can’t do without coffee altogether, but if you buy a box of instant coffee sachets from a discount store, you can often buy five for £1.
Small savings on your food shopping can make a big difference. For example, do you really need branded products? Buying the supermarket’s own brand products, particularly their “value” or “budget” ranges, can save you a fortune.
6. Monthly expenses
Sit down and determine what monthly bills and expenses you have. Compare the prices of different electricity and gas providers to see if you can switch to get a cheaper price.
Do the same with your phone bill where possible. By changing contract, you could possibly spend less on your mobile phone bundle.
Living on a tighter budget means you may have to sacrifice some things in order to manage your money better, but it doesn’t mean your quality of life has to deteriorate.
7. Free activities
One thing you don’t have to sacrifice when living on a tight budget is fresh air and exercise. Under the lockdown rules, you are permitted to leave home to exercise. The beauty of this is that most forms of exercise are free.
Think cycling, going to the beach, jogging, walking the dog and other healthy pastimes that will leave you feeling physically and mentally refreshed.
8. Avoid waste
Only buy the amount of food you can actually eat, to reduce waste. The average UK family throws away around £700 of food a year, simply because they bought too much, and it has gone past it’s use-by date. UK-wide, this amounts to 4.5 million tonnes of food waste annually.
Shoppers do seem to be tightening their purse strings and cutting down on waste as a result of the pandemic. In 2018, the volume of food waste was a massive 9.5 million tonnes. By 2020, it had gone down by 5 million tonnes as the effects of Covid-19 hit consumers hard.
These handy tips can help you to manage your money and stay in control, so you have something to build on in the longer term, when the current crisis has passed.
