As a nation, it seems we don’t know how to make a budget…
On a recent flight to Rome, I was reading through the British Airways “Business Life” magazine. On the bottom of most pages, they include interesting facts and figures.
This week, the one figure that impacted me the hardest was “18 million people in the UK regularly run out of cash before their next pay day”. Wow.
There are currently around 30 million people employed in the UK. The statement “before their next pay day” implies that these 18 million people are employed adults.
Therefore, 60% of employed adults in the UK are regularly running out of cash before their next pay day!!
Personally, this statistic sounds a little incredible to be true. However, let’s assume it is for the time being. I’m going to conclude that, if this is true, 60% of Britons either:
- do not know how to make a budget
- do not keep a budget
- do not keep an accurate budget
- keep a budget but reach a negative figure at the end of each month
Why do people hate budgets?
I’m really not sure. Fear of maths? Fear of spreadsheets? Fear of knowing the reality? Maybe people just don’t care?!
Why do you think that people hate budgets so much?
Don’t panic – the internet was made for things like this!
Not everyone hates budgets, you see. These people love them. So much.
etc, etc, etc…
How to create a budget
I could explain in detail how I made my wonderful Excel budget above, complete with lots of pretty graphs and links and other geeky Excel stuff. But, obviously I have my street cred to maintain. Therefore, I’ll let other people do this for me:
Money Crashers – How to make a budget
Yahoo Finance – Budget from scrach
Your money counts – six secrets to create a budget you can stick with
Also, there are great professionally made tools out there to really help you with your budget. Check out Counting My Pennies’ review of You Need A Budget (YNAB) for example.
Any other good links to free help with budget creation?
Does anyone NOT keep a budget? Is there anyone who does keep a budget but finds them in the 60% that run out of cash before pay day? Why do you think this is?
You’re not the only nations with the issue, I think many people actually dislike making budgets and it’s a pity, since it really helps optimize your cash flow and finding out where you can save more money.
I’m sure the number in other countries (specifically the US given the general love of debt) is probably even worse than the UK!
Clarrise @ Make Money Your Way says
I know some of my friends or (included me) really had a hard time when it comes to budgeting. Honestly it’s just recently that I keep track of my budget I’m very happy that I have read all this personal finance blog and I’ve learned a lot from it and I know I will learn more in the future.
Eva @ Girl Counting Pennies says
Wow, if this is correct then it truly is incredible! Back in the day when I had no idea how to budget and didn’t really want to in the first place, I was under the impression I was one of a few people who were living from paycheck to paycheck… I guess not many people want to budget in the first place. Who likes to save? Who likes to say “no” to temptations? It’s hard work. Yes, saving can actually be fun and these days I love seeing my debt disappear and savings grow, but it does take a lot of self-discipline and motivation. People are lazy. I was lazy. I am sure there are people who budget and genuinely run out of money as they don’t make enough of it perhaps, but the majority is probably not trying hard enough, if at all. No judgement, just saying 😛 Hopefully, this will change. I am glad it changed for me.
Thanks for the comment Eva. I don’t think I know one person who DOES already keep a budget who would stop. Once you get it in place, it isn’t hard work and tracking your income/expenses and net wealth actually becomes fun! It did for me anyway…
Budget and the Beach says
I do keep a budget but often go over. Or because I ‘m a freelancer I don’t make my projected income. I think people want to avoid it because it seems like hard work, or they don’t really want to know where their money is going. It’s easier to be in denial. Or some feel they are making enough money that they are able to buy the things they need and have money left over to save and splurge.
I think the point that it is “easier to be in denial” is an extremely valid one. People know that fixing their financial situation will be hard work and, in general, people avoid hard work!!
DC @ Young Adult Money says
As a serious Excel nerd – I literally love Excel and am so lucky to get to use it every day for my full-time job – that looks like an awesome Excel spreadsheet! Are you going to make a budget template available for download? I have considered making a template for tracking expenses, as I have been using mine for over a year now and think others would find it useful. Actually I have a few Excel ideas that I’d like to add to my blog.
I was thinking about it, but I love my spreadsheet more than anything else I’ve tried for budgeting because I made it! Its mine. I know exactly how it works, what I need to update and when. Just because I love it, doesn’t mean others will.
That said, I think for Excel amateurs, the templates are extremely useful so would recommend that you add a standardized version of yours on your site as a template perhaps?
Simon @ Modest Money says
Let’s face it…budgets are hard work. Who wants to sit down and starting counting pennies and allocating where each goes…its unpleasant, it feels like a constraint on our psyche, its a widespread problem, not just in the UK and its a mindset we certainly need to change.
I tend to overshoot my budget most times and end up broke before payday (guess I’d make part of those statistics), something am definitely trying to get a grip on.
Going through the exercise of figuring out how much we were spending in various categories and if it was reasonable or could be reduced was a bit of a job at the time, but once that was done then it’s was just a matter of following the spending plan. Many of our bills are the same amount, due on the same day every month. That doesn’t have to be figured out again until a contract is up for renewal, or we decide to comparison shop to see if there’s a better deal available somewhere else (eg. cell, internet, insurance). For the variable items (gas, groceries, electricity) we enter an estimated amount in the plan and as the actual amounts are spent we update the spreadsheet. If I struggled to stay within the grocery or gas budget this year, I may use a slightly higher estimate next year to reflect the higher cost of those items. If I comfortable managed on the amount I’d allocated, then I’ll use the same amount the next year. I set up my spending plan a year in advance for all the known, predictable items which make up about 80-90% of our spending. Each week I can see how much excess there ought to be if we stick to the plan. If we do some unplanned spending it comes out of the excess. This means that on Friday when I balance up the spreadsheet with the bank account I’ll have slightly excess money that I had expected. Regardless, all the excess not needed to cover next week and beyond is transferred out to our retirement accounts or we make an extra mortgage payment. Every transfer puts us that much closer to early retirement so allocating those pennies is pure fun when you know the end goal. Yours may be an exotic car, or the purchase of a house, or whatever is important to you. It’s always far better to tell your money where to go than let you money tell you where you are allowed to go.