Being on a low income with a young family is hard. Between 2004 – 2009 I was a stay at home mum and we lived on my husband’s modest wage. It wasn’t always easy but I don’t have any regrets about the way we did it.

Think Banking has asked me to share my budgeting tips.

1. It’s all in the mind

My first tip has nothing to do with money at all. A lot of your happiness is in your head. If you choose to believe that you are living in a situation of lack ie. you have a low income and no ‘stuff’ then your happiness will be affected.

If you choose to believe that you’re still in the top percentage of rich people in the world then that’s going to considerably change how you feel about your position. There’s great pleasure in being able to tuck a child into a warm bed with a full belly. There are many parents out there that can’t do that so stop worrying about the holidays they haven’t been on and the toys they don’t own.

There’s plenty of time for all that later.

2. Control your money before it controls you

The worst thing in life is money trouble. It breaks up marriages and it causes untold anger, stress and upset.

It doesn’t matter how much money you have coming in the basic principle is the same. You can’t go wrong if you take off the amount you’ll need for your bills first and stick that in a seperate account. I can’t tell you how much more relaxed your life will be knowing that all your bills are covered and you don’t have to think about it anymore.

With what’s left choose an amount to save, have this come off automatically. Spend and fully enjoy the rest.

3. “There is nothing left”

If after your bills there is nothing left, or worse still there isn’t enough to pay your bills. You have two choices cut back or earn more. From experience I recommend a combination of both. Cutting back is easy, you’ve heard lots of tips on that already. Earning extra money is also easy if you really need it. There are hundreds of ways to earn extra money and once you get into the right mindset it’s actually a lot of fun finding new ways to earn.

Lots of people will read and ignore that last bit because it actually takes a bit of effort. Don’t wait until you’re in dire straits to start scrabbling around trying to pull together extra cash. Start now and build up a regular additional income stream that will see you through difficult times.

4. Expect the unexpected

“We were getting by fine until the tv broke and we had to replace it”

“I was on top of the bills and then I remembered the **** car tax”

This is the sort of thing you hear recounted every day. You budget for the weekly/monthly expenses and then something ‘unexpected’ happens and it blows your plans.

Think for a moment. Is a tv breaking an ‘unexpected’ expense? Not really, your ‘stuff’ will periodically break. You didn’t buy your tv expecting it to work til’ the day you die did you?

Same with the car tax, that’s even worse as it’s a yearly expense. It’s not unexpected at all!

The key to managing the ebbs and flows of breakages and ‘unexpected’ expenses is;

a) make sure that your ‘bills’ includes those bills that come in yearly plus a budget for christmas. It comes round every year, don’t be shocked when it comes round again and you have no money for it!

b) Save an amount into an ‘emergency fund’, these are for the truly unexpected events ie flood, fire, theft, earthquake, volcanic eruption?!

5. Getting ahead

There will come a time when you get back up to two full time incomes or your childcare costs disappear or your mumpreneur business takes off and you’ll have significantly more disposable income. The next step is to give yourself a bit more to play with but to use most of it to help you get a bit further ahead and realise your dreams.

Start off with saving for future cars and holidays so that you don’t have to take loans and use credit.

Now’s the time to make your ‘to do before I die‘ list. This will give your new found income some purpose, lack of purpose will result in frittering and ‘keeping up with the Jones” style competitions.

I’m no expert but these tips have seen me through both lean and lucrative times. My happiness levels have been much the same throughout.

It’s a new year and most us have set financial goals whether that’s saving for a holiday or a new car, paying down debt or, if you’re lucky investing. This year I’m having a ‘quiet’ year, in other words I’ll be paying off debts and trying to build up some savings after the extravagance of last year (several trips away including a two week holiday to Disneyworld) I’m sure many will be focusing on this given the economy.

I’ve had many ‘systems’ in the past for maximising the household budget from the ‘if it’s in the bank then we can spend it system’ to the ‘account for every penny in a detailed spreadsheet system’. I currently use a system whereby I calculate my projected expenses for the year, allow for a monthly entertainment budget and then set that figure aside weekly. The rest goes towards paying debts or accumulating savings. I’ve found this to be the simplest and most efficient way to manage the household budget, it doesn’t allow for much wayward spending and monetary decisions need to be made consciously (no mad spending sprees at chez littlemummy I’m afraid). On the plus side I do feel that we get a lot of ‘bang for our buck’ especially in the entertainment category as we’re always looking to get the best value (note: this doesn’t always mean the cheap option, often it’s the opposite).

Do you budget? How do you manage the household income?

ACF stands for America’s Cheapest Family by the way, it’s a book I bought last year after it was given a positive review at The Simple Dollar. The book covers all aspect of saving money and spending wisely, one of the biggest takeaways though has been their budgeting system.

Like most people (I think?) I used to muddle along and as long as my bank balance was ‘in the black’ I thought I was doing just fine, until of course the car broke down and we hadn’t accounted for the unseen cost of repair, which is where it all starts to get complicated and stressful if you don’t have savings. The ACF budgeting system takes into account these seemingly ‘unseen’ costs and factors them into a budgeting system that is easy to use and provides piece of mind that when something unexpected happens the funds are there to take care of it. Sound good?

I manage my budgeting system in a (very) simple spreadsheet (no formula required! Unless you want to). Along the top I have all the categories in which we spend money, ie insurance, clothing, car, mortgage, food etc.. I take the projected annual cost of each category and divide by 52. The amount left is the amount I must put into that category or ‘account’ each week, we are paid weekly, you may choose to do this part monthly. The projection is easy to figure out if it’s a monthly direct debit I times by 12 then divide by 52. If it’s something more difficult like the car (which includes repair!) I allow for the most expensive car repair we’ve had (?650) and then divide by 52 and hey presto. For household maintenance I allow around 1% annually for the value of our home which is a generally accepted amount ie if my home’s market value is ?100,000 then I allow ?1000 per year, which sounds about right.

So as we are paid weekly (and this is much easier if you have internet banking), I breakdown the pay into these categories, leftover money is put into a seperate ‘frivolous spending’ account. All bills and spending which is accountable comes out of the first account, I manually minus the money out of the categories each morning. This sounds like a complicated process, but in reality it takes me around five minutes or less each morning.

I’ve been testing this budgeting system for nearly six months and I can honestly say I’ve never worried less about money. I’ve nearly always kept savings for unseen disasters, however, it’s all too easy to spend those savings, not when you’re using this budgeting system, it’s easier to realise that eventually these ‘unseen’ events will happen and that you’re actually just saving up for when they do. Instead of the event being a financial disaster it becomes just another bill, one that you’ve already budgeted for! Now that the routine is in place it’s so simple to manage that I can’t ever see me not doing it now.

How do you manage the household finances?

There’s been a lot of coverage recently about an impending recession, the american mortgage crisis, and the rising price of food and fuel. Is there anyone who hasn’t given at least a quick thought to their monthly budget and looked for where they could trim some fat? I have, and I’ve also been wondering how I’m doing with my food budget compared to everyone else. This isn’t an opportunity for one upmanship, I’m actually more interested in finding those who are spending less, and how?

Please answer the following questions either on your own blog (and link here, so I can find you) or in the comments.

Here are the questions and my answers.

1.) Predominantly, where do you shop? Tesco

2.) How often do you shop? Weekly

3.) How much (on average) do you spend? ?60(this includes household products and nappies)

4.) How many people are you buying for? 2 adults, one infant

5.) Do you do any of the following – meal plan, make a list, have a budget? Yes to all

6.) If at all, how have you tried to lower your spending on food and household items? I started meal planning and buying online to keep my costs down, recently though I have had to increase my budget from ?50 to ?60 as I was really feeling the squeeze.

Thanks for taking part.