We are living in a time of economic uncertainty where nothing is absolutely defined. Rising living expenses in the UK are contributing to the widespread fear of job losses and unemployment, which makes it more difficult to manage day-to-day expenses and save money for a rainy day. It’s natural for anyone in a tough financial situation to react with a flood of strong emotions and a lingering sense of financial dread.
As the grim reality bears down upon all of us, I take time to reflect and retrospect on certain past decisions that have helped me become resilient from the growing effects of a devastating economic climate. When I was young, I made quite a few glaring errors that left a gaping hole in my financial health.
However, these mistakes became too costly when I had to face them during a global financial crisis. Thankfully, I wiggled out of it, by budgeting smartly and with on-time assistance from some safe payday loans and personal loans. The entire experience, however, left a lasting impression on my mind as well as my credit history.
If you want to navigate tough financial times without making glaring errors in judgment like I did, then this article is for you. Here’s my list of the top 5 smart budget tactics that have helped me sail through choppy financial waters.
1. Review Your Income Sources
If there’s one big mistake I wish I’d never made, it’s not knowing how much I really earn. Knowing a definite number as your income is the first step before you can say ‘budget’.
If I am to speak from personal experience, I recommend you check all your bank accounts and other sources of regular or intermittent income and arrive at a number, whatever it may be, before you begin budgeting. Asking yourself these questions can also help:
- What is my current total income from all income sources?
- What do I use my income for?
- What should I be spending on?
- Do I have any savings? How much do I save?
- How can I improve my income?
Answer these questions truthfully to understand and identify where the gaps lie. If your income is not regular, factor in the time gap for the period of time you’re not earning.
2. Take up the “1% Challenge”
Once you understand what you really earn every month, target your savings. The 1% challenge is a great way to start if you’re new to saving. Here’s how you go about it:
- Calculate 1% of your pay cheque
- Set up a separate savings account
- Arrange to put the calculated 1% into this savings account every payday
- Forget about this account for a year
- Revisit the account after a year and increase the amount to 2% or more
One percent may not seem like much, but thanks to the power of compounding and the interest earned on your savings, you will be staring at a lumpsum amount in your kitty at the end of the year. I followed this challenge myself, which quickly became a launchpad for building my savings for the future.
3. Sell What You Don’t Need
When I was looking for an additional source of income to support my pay cheque, I came across the idea of selling the stuff I no longer needed. I rummaged through my cupboards and drawers and found a truckload of items that I no longer needed or used. From my old Gameboy to a vintage lamp, I was successful at getting some extra quid to supplement my income.
I strongly recommend you channel your inner Marie Kondo by segregating the stuff you don’t use and don’t need. Like they say, ‘One man’s trash is another man’s treasure’, your unwanted belongings might just be useful to someone else. Besides decluttering, you might end up making a killing on the online marketplaces or at a local garage sale. It’s a clear win-win situation.
4. Borrowing over Buying
Borrowing over buying stuff was one game-changer that helped me keep my expenses within my budget. I had this impulsive and reckless habit of impulse buying stuff, using it once (sometimes never), and then discarding it. The list includes Halloween costumes, deeply discounted apparel, and a variety of personal care products. What I was left with was a home full of stuff I never really needed to begin with.
I knew that had to stop, especially when money was tight.
I learnt that it was okay to borrow certain items—like a tuxedo for a special family event or a power tool for fixing the roof—instead of adding them to the cart and hitting the buy button.
There were times when I wanted to splurge on an item, and it was difficult to hold back. In those times, I imposed a 30-day waiting period on myself, especially for a big-ticket purchase like the latest iPhone or a PlayStation console. Put the end date in your calendar and look for a cheaper alternative in the meantime. Trust me, you’ll end up surprising yourself with the untapped determination you possess.
5. The No-Spend Month Challenge
Discipline can bring out the best in people, especially in the most challenging times. So when the time was really tough, a friend suggested I take up the No-Spend Month challenge. It’s a challenge where for one month I stuck to spending only on essentials with zero frills. It meant a full month buying basic groceries, paying utility bills, mortgage or insurance payments, and travel costs.
After gaining back my financial strength, I’ve continued to do this challenge every now and then. From my personal experience, I suggest picking at least one month in the year when you don’t need to spend too much and are less tempted to overspend. It can seem tough at first, as it did for me, but the small fortune you earn from curbing unnecessary spending at the end of the month is surely worth it!
Summing Up
No one can foresee what will happen to your finances in the future. With some thoughtful measures in place, you can be in charge of directing where your money goes and revisiting it during the rainy days of life.
If you want my advice, I’d say it’s best to buckle up your budget and be better prepared for any uncertainty life or the economy might spin your way.
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