Making a budget work for you

Making a budget work for you isn't as hard as it seems. When you've looked at what you earn against how much you spend and the two are way out in the wrong direction, there are ways to ease the pressure and tip the balance in the right direction.

Reviewing your budget

It's really important to set up your budget properly, making sure everything you spend money on is included. Once you've got your budget completed and it's in front of you, start working through each line and seeing if you can reduce what you pay out.

Here, we've split this into two areas: essentials and non-essentials. This is where an Excel based budget spreadsheet really comes in handy as the totals will be totted up automatically. Download your free spreadsheet now.

Making a budget balance by reducing the non-essential items

Some of the quickest ways of making a budget balance in the right direction is to look at your non-essential spending. This would include things such as socialising, clothes, beauty and gym subscriptions.

These non-essential areas are exactly that – they're non-essential. You can live without them. You'll still have a home, lighting, heat and food. You'll survive.

By no means completely reduce them or zero them out, but certainly take a look at them when making your budget balance. Consider the following suggestions and see how it would change your monthly outgoings:

• Going out one time less per month, or per week if you're a social butterfly
• Setting a limit on the number of clothing items you buy per month
• Cancelling your gym subscription as you can go running in your local park
• Getting your hair cut every 8 weeks instead of 6 weeks, or grow your hair
• Reviewing how you eat including what food you buy 'on the go', i.e. lunches at work or takeaways in the evening
• Taking a look at your digital subscriptions and considering downgrading your package or using Freeview
• Reviewing your charitable giving

If you find that there isn't much of a change or the difference isn't big enough to meet your target, then consider working with your budget a bit more. Be careful though. There's no point turning into a hermit or really making your life hard unless you've got serious debts to pay off. You've still got to have a little fun.

Making a budget balance by adjusting the essential elements

You can't do without the essential items, but you can certainly ensure that you're getting the best deal. When we first sign up for the essentials you usually get yourself the best deal possible, however over time the deals change and better offers come into the market place.

Regularly reviewing what you're paying is a simple and easy way to ensure that you're making the most of your money. Here are some ideas for making a budget balance by adjusting the essential items:

Mortgage or rent

If you've got a mortgage then ensure you're on the best deal. Many people stay on the standard variable rate once their deal has come to an end. This is usually quite high as the banks need to recoup as much as they get after your deal has passed.

Have a look on moneysupermarket.com for the best mortgage rates for your situation and see if you can save, alternatively speak to an independent mortgage adviser (but watch out for their fees).

If you rent property ask if you can have a rent reduction in return for signing a longer lease. If you're a good tenant, i.e. you look after the property and always pay on time, you may get lucky. There's no harm in asking – the worst they can say is 'no'. If they put up the rent, then you can always look elsewhere.

Gas and electric

The energy market is now cluttered with different suppliers, all wanting your business. I don't know about you, but I get a cold-caller a week knocking on the door asking how much I pay. There are some good deals to be had and as prices change, it's worth checking whether you could save or not. Some companies even offer one of discounts if you switch. Uswitch.com is a great place to check if you could save money in this area.

Water

Ask your water company if you can have a water meter fitted if you don't have one already. Most people will save if they do. Even if just means you're more conscious of the amount of water you use, it will be good for you and the environment.

Insurance

Review your insurance payments by shopping around and making sure you have the best deal, especially now the supermarkets offer financial services. Review how much you pay for all the following areas:

• Car insurance
• Critical illness insurance
• Life insurance
• Pet insurance
• Travel insurance

When you're making a budget balance, it may take a while. These elements will take time to review and implement, especially with the essentials list above so give yourself a couple of months to do this and see the difference. This review process should happen whenever your mortgage deal comes to an end and annually for the other items.

Keeping on top of these is a bit of a mission, but well worth it if it saves you a couple of thousand pounds a year.