Budgeting and Financial Planning

Investing can be the key to long-term financial health by making your money work for you. It can be tricky sometimes to put together enough to get your investment portfolio started, and that’s where budgeting comes in. Alongside optimising your income, curbing your expenditure using a budget can help you build up some savings to get you started.

Small spends

There’s an old saying that if you ‘look after the pennies, the pounds will look after themselves’. It’s easier to cut your expenditure than it is to make your investments grow faster, even though it may not always feel that way!

A lot of us talk ourselves into a buying a post-ward round coffee to be social, or picking up lunch from the canteen because we were on-call last night and didn’t have time to pack anything. These small spends don’t amount to much if they’re only an occasional luxury, but it’s very easy to make them a habit. And that small spend of £3 on a coffee and £3 on that lunchtime meal deal can become a pretty expensive habit, amounting to £150 a month and £1,800 per year.

If buying lunch is something you really enjoy doing, or you just can’t find the time to make it, that’s okay; it’s just important to be aware of how it adds up and where your money is going. Thankfully there are lots of apps, programmes and bank accounts designed to make this easier.

Apps and programmes

There are simple, automated ways of tracking your expenses:

• Fintech companies like Monzo and Starling Banks automatically record your transactions and align it with your spending goals.
• Other online trackers like Money Dashboard link to your banks and track transactions automatically. These are usually free, and instead, make their profits by selling anonymised transactional data to third-parties.

Budgets and planners do work, but more recent evidence shows that it is the physical act of recording your expenses that makes the most significant impact on your spending.

Some budget trackers instead require you to record your transactions manually and align these with spending goals. One of the most popular and comprehensive budgeting apps is YNAB (r) but this has a monthly fee.

Tracking your savings

Just as you keep track of your spending, make sure you keep track of your savings! This will not only help you to keep an eye on where you are with regards to your goals, such as saving for a house deposit; it will enable you to recognise the reward from all your hard work budgeting.