Living on a fixed income while managing bills and discretionary spending can feel challenging, especially if you struggle with impulse buys. Here, we’ll walk you through a plan to help you track, budget, and save more effectively, along with a sample Excel budget to streamline the process.
1. Track Every Expense in Real-Time
Being mindful of your expenses begins with knowing where every penny goes. Start by tracking each purchase immediately as it happens. You can use an app or a simple notebook to record this.
Example Calculation: Let’s say you spend an average of £5 daily on small expenses you don’t necessarily need or remember, like snacks or small impulse buys. Over a month (30 days), this adds up to:
5 x 30 = £150
If you reduce this amount by half, you’ll save an additional £75 each month!
Excel Setup:
Set up a simple table in Excel with columns like Date, Description, Category, and Amount. Here’s an example structure:
| Date | Description | Category | Amount (£) |
|---|---|---|---|
| 01/11/2024 | Coffee | Takeout | 3.50 |
| 02/11/2024 | Magazine | Entertainment | 2.00 |
| 02/11/2024 | Lunch with Friends | Dining Out | 10.00 |
| 03/11/2024 | Bus Fare | Transport | 2.50 |
To sum your total spending for the month, you can use the Excel formula:
=SUM(D2:D31)
2. Set a Weekly Cash Allowance for Discretionary Spending
Establishing a cash allowance prevents you from overspending on unnecessary items. Let’s assume you allocate £50 per week. Only take this amount in cash, and leave your card at home when you go out for non-essentials.
Example Calculation: If you used to spend £75 a week on discretionary items and reduce it to £50, you save:
75 – 50 = £25 per week
In a month, that’s an additional:
25 x 4 = £100 saved
Excel Setup:
Add a row for Weekly Cash Allowance and subtract it from your total income:
| Category | Budget (£) | Spent (£) | Remaining (£) |
|---|---|---|---|
| Weekly Cash Allowance | 50 | 45 | 5 |
| Monthly Total | 200 | 180 | 20 |
3. Create Reward-Driven Savings Goals
Aiming for smaller savings goals adds a motivational boost. For instance, if you limit coffee outings to twice a month, reward yourself with something special from your favorite cafe at the end of each month if you stay within your goal.
Example Calculation: If coffee outings cost £4 per drink and you limit yourself to twice a month instead of four times:
4 x 2 = £8
4 x 4 = £16 → £16 – £8 = £8 saved
4. Unsubscribe from Spending Temptations
Promotions can lead to impulse purchases, so unsubscribe from marketing emails or social media that prompt spending. This simple habit keeps your focus on essential items and your savings goals.
5. Weekly Spending Review
Set aside 10 minutes each week to review your purchases. Highlight impulse buys to become more aware of spending triggers. Regularly analyzing your spending reveals patterns, helping you avoid repeating similar unnecessary purchases.
Excel Setup:
Use Excel to categorize and color-code impulse purchases in your spending table:
| Item | Cost (£) | Reason for Purchase |
|---|---|---|
| New phone case | 10 | Impulse |
| Snacks at work | 5 | Convenience |
6. Implement No-Spend Days
Designate a day or two each week to avoid spending on anything outside essentials. These days reset your mindset and prevent unconscious purchases.
7. Pre-Plan Outings to Avoid Impulse Spending
Planning ahead helps you avoid overspending. For example, decide on a budget for social outings. Suppose you allocate £15 per social outing instead of going overboard, helping you save on incidental expenses.
8. Separate Your Savings
If your savings are in the same account as your spending money, it’s easy to dip into them. Use a separate bank account or an “invisible” account to hide savings.
Example Calculation: If you save £400 each month, moving it to an untouchable account keeps it secure, building a nest egg of:
400 x 12 = £4,800 in a year
Sample Excel Budget Template
Here’s how a basic budget might look, combining all your monthly categories, actual spending, and the difference to track if you’re on target:
| Category | Budget (£) | Actual (£) | Difference (£) |
|---|---|---|---|
| Rent | 200 | 200 | 0 |
| Savings | 400 | 400 | 0 |
| Driving Lessons | 100 | 90 | +10 |
| Phone Bill | 70 | 70 | 0 |
| Contact Lenses | 20 | 20 | 0 |
| Bus Pass | 50 | 50 | 0 |
| Discretionary Spending | 160 | 180 | -20 |
| Total | 1000 | 1010 | -10 |
Formulas to Use:
Total Budget: =SUM(B2:B8)
Total Actual: =SUM(C2:C8)
Difference: =B2 - C2 (copy down for each row)
