UPDATE 17 March: Further benefit changes have been announced since this article...
Martin Lewis’ top 3 essential budgeting tips
When money’s tight, learning how to budget effectively is one of the most useful skills you can master. A budget will help you know exactly what you’ve got coming in, what you’ve got going out, and how much you’ve got left to pay towards your debts.
But budgeting is about more than just writing down a list of numbers. It’s also about learning new habits and making long-term changes to the way you think about money. Reading about what other people do to help them stick to their budget can be really helpful, and the MoneySavingExpert.com forum is a great place to look for ideas.
The other week we caught up with MSE’s main man, Martin Lewis. He was filming his Money Show roadshow around the corner from our Leeds office, so we popped along to say hello.
Naturally, budgeting is something he knows a thing or two about, so he was happy to share his top tips with us. So here you have it, three top budgeting tips from the man himself!
1. Watch the payday trap
According to Martin, “the day to splurge is the day before payday, not the day after”. His office used to be in a big complex with a bar, and every payday that’s where everyone would go after finishing work.
When Martin asked people why they were there, everyone told him it was because they’d just been paid and were out celebrating.
“That’s completely the wrong mentality”, Martin says. “Payday is the day to be careful, and then you budget throughout the month.
“If you’ve got a little spare at the end of the month, that’s the day to splurge. But if you splurge on payday you then have to have the rest of the month struggling to live. That’s not a recipe for happiness!”
2. Use the piggy-banking technique
The idea behind the piggy-banking technique is that “we’re not trustworthy with money”, as Martin puts it. That might sound a bit harsh, but hand-on-heart I think he’s got a point. As someone who struggles not to spend spare cash if I’ve got it, I recognise that untrustworthiness in myself!
The piggy-banking technique is when you make sure that any money that comes into your primary account is earmarked for a specific purpose, and even transferred out into other accounts.
For example you might have an account for bills and all the money you’ll need to pay the bills is transferred into that account at the start of the month. You might also have an account to help you save for Christmas or birthdays, and the same applies – any money you want to put towards these things are immediately transferred into that account.
“When you get paid, a couple of days later move it into those separate accounts. Or you could do a similar thing on a spreadsheet. And then when you look at your bank account it actually tells you how much money you have to spend”, Martin says.
3. Follow Martin’s two money mantras
If you’re a MoneySavingExpert.com aficionado, chances are you’ll have heard of Martin’s money mantras.
Spending money is often an impulsive thing, and Martin has two money mantras that will help you keep those impulses in check and prevent you from spending money unnecessarily.
One mantra is for people who’re skint, and the other is for people who are feeling flusher.
“If you’re skint the three questions you should ask yourself before you buy anything are, 1) Do I need it? If you don’t need it, don’t buy it. 2) Can I afford it? If you can’t afford it, don’t buy it. 3) Have I checked whether it’s available cheaper anywhere else? If you haven’t checked, check.”
“If you’re not skint, you need to ask yourself, 1) Will I use it? If you won’t use it, don’t buy it. 2) Is it worth it? This is the really difficult one. So while you might use an expensive pair of shoes, if you’d only use them once or twice, think about the cost per wear. Would you not be better off buying something that’s cheaper that you might wear more often, or even cheaper that you only wear once or twice? And 3) Have I checked whether it’s available cheaper elsewhere? And if you haven’t checked, check.”
Take a look at the MoneySavingExpert.com website for a free copy of these money mantras to print out and keep in your purse or wallet.
Want more budgeting tips and money-saving ideas? Sign up to get our monthly newsletter delivered straight to your inbox.