Here we go, I'm going to be lectured about saving my pennies and not buying the odd coffee here and there.

Not at all!

Let me explain.

'How To Budget' has 1.2bn results on Google, so it's certainly a topic that many people are thinking about and perhaps struggling with."> Budgeting Your Way To An Easier Financial Life | ABC Article Directory
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Budgeting Your Way To An Easier Financial Life

     The dreaded 'B' word, you may be thinking...

Here we go, I'm going to be lectured about saving my pennies and not buying the odd coffee here and there.

Not at all!

Let me explain.

'How To Budget' has 1.2bn results on Google, so it's certainly a topic that many people are thinking about and perhaps struggling with.

My belief is that, regardless of how much someone earns, we can all become more educated about where our money goes and make better, more informed decisions.

So, with this in mind I'd like to share a resource with you that may well change how you think about how you manage your money. I've only recently started using it for our household and my experience so far is very positive.

Let me give you a bit more background first.

When we work with clients we always ask them to provide us with a breakdown of their household/personal expenditure. Whilst this gives us a good picture of their historical expenditure, what it doesn't do is plan what next year's expenditure is likely to be.

This is where the 'You Need A Budget' (YNAB) software comes in.

The idea behind it is that it will help you plan where you spend your money via YNAB's 4 rules:

1. Give every pound a job 2. Save for a rainy day 3. Roll with the punches 4. Live on last month's income

Rather than me reviewing the software here, you can learn more at YNAB's website. They also offer training videos which are very useful.

And here's a list of recorded traning classes that you can view.

What I can do though is share with you what I'm using it for in Prince HQ.

My wife and I run sole accounts as well as joint bank accounts. For the latter, we have one for fixed costs and one for variables.

YNAB asks you to split all your spending into categories (we've called ours household, personal, cars etc) and then create sub-categories within each. It's entirely up to you what you call these (eg food, entertainment).

Then, you allocate a monthly budget to each sub-category which, at outset, will give you an idea of what your monthly spend is across all areas. To provide some form of accuracy, I used our last 3 months spending.

You then track your spending as you make purchases.

We tend to do this on the go on our iPhones and then reconcile once per week as it's unlikely we'll record every item.

It's all synched in the cloud so as soon as you update the data it's available on all devices.

So, as you go along you should be able to build up an insightful picture of where you're spending your money. After all, if you run a business this is a similar process (financial forecasting) that you would go through, perhaps with your accountant.

So why not with your personal spending?

The idea is that if you overspend on a particular sub-category, rather than just move money from your savings to cover it you actually re-allocate money from other sub-categories where you have surplus available (assuming that's the case obviously!).

The idea is that you try to limit your spending to the overall monthly budget that you set. YNAB's third rule, roll with the punches, simply means that there will always be the odd unforeseen expenditure so it's OK to be flexible.

What I've found to be the big benefit using the software is that we've factored in all our annual expenditure, including amounts that are usually paid annually such as car tax plus insurance.

It's then much easier to see how much money can be saved/invested elsewhere.

The other plus is that, even after using it for a few weeks, my wife are talking much more about money and where we should be spending it.

Key Condsiderations

Budgeting really doesn't have to be a painful activity and YNAB have developed a tool that is actually fun to use.

Action Point

Go to the YNAB site.

Download the software for your 34 day trial and start budgeting!

Article Source:

Ray Prince is a fee based Certified Financial Planner with RW Ltd, & helps UK Resident Doctors and Dentists plan to achieve their financial objectives. Just visit the specialist website for dentists' and medics' financial planning where you can request your free retirement planning guide. RW Ltd is authorised and regulated by the FCA.

Posted on 2013-08-06, By: *

* Click on the author's name to view their profile and articles!!!

Note: The content of this article solely conveys the opinion of its author,

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