The Guardian reported in February 2016 that the cost of raising a child in the UK has reached the peak costs. A child born in 2016 may require up to £231,843 from family finances for upbringing up to the age of 21 years. The report claims that parents will spend around £70,000 on babysitting and childcare and around £74,000 on expenses like uniforms, books, and school trips.
You may need to completely overhaul your lifestyle, even if you are living a frugal lifestyle. Saving money from the budget requires baby steps. You may save hundreds of pounds by avoiding a vacation but you can save thousands of pounds by making small alterations in your budget. The following tips are helpful to support a family of five people without taking payday loans.
Draw a Family Tree
Everything taught in the school is practicable. A family tree describes the milestones of the growth of your family. Draw a family tree and mention the ages of all family members. Write down the expected finances including medical emergencies for elders and school fees for toddlers. An example is given here.
- Father: 35 years, healthy with minor Asthma, 30 years to retirement, and possible expenses include XYZ
- Mother: 32 years, healthy with minor PCOS, 33 years to retirement, possible expenses include ABC
- School goer: 7 years, healthy, 10 years to college, yearly fees DEF
- Ready for school: 3 years, healthy, 13 years to college, yearly fees before college KHF
- Toddler: 1 year, healthy, 15 years to college, yearly fees before college LHY
This step is required to provide you a clear idea about your expenses.
Bring It to the Table
Bring your bills, medical expenses, insurances, mortgage payments, fuel expenses, vacation expenses, and everything else to the table. Now calculate the total of everything. Secondly, calculate the total of individual elements. Finally, calculate the amount that you can save by cutting small expenses (saving money by reducing energy consumption, etc.).
Now, calculate the impact of all savings on the total amount. Subtract the total of total amount after saving from the total amount before saving.
Calculate Individual Expenses
Financial management depends more on small expenses than the large ones. The total of small expenses is always more than the total of large expenses. Calculate individual expenses to find out where your money goes. These calculations include everything from utilities to discretionary spending, secured debts, and spending through credit cards.
You can also create sub-categories. For example, you can save on the electricity bill by quitting the weekend barbecue. You can also watch the movie twice a month instead of four times a month.
Also, make sure to consider the fixed bills. These include mortgage, credit card payments, insurances, etc. Find out ways to save money from the fixed bills. Calculate the costs before saving and after saving. Sometimes, the cost after saving is higher than the cost before saving. For example, if you pay £950 mortgage every month and you want to move to a smaller house then the moving cost will charge up to £2000. If your new mortgage is £750 then it will take 10 months to recover the moving cost. You will start saving money after 10 months.
Use a Budget Software Application
The chances of human error are always unpredictable. While you can get a second budgetary advice from a finance expert or lawyer, you can also get help from a budget software application. These applications mention your unnecessary expenses along with providing a numerical or graphical representation of your savings. Some software applications also provide a quantitative and qualitative outlook regarding the effect of these alterations on the quality of your lifestyle.
Focus on the Discretionary Expenditure and Debt Repayment
Mortgage is of two types: adjusted rate mortgage and fixed rate mortgage. In either case, the lender charges some extra payment for paying mortgage in advance. The conditions differ according to your choice of mortgage plan. However, once you repay the loan, you can enjoy the financial freedom and use that money for improving the quality of your lifestyle. For this, quit your discretionary expenditure and use that money to pay off debts. You can take kids on cheaper excursions like zoo trip and hiking on ticker-free public place.
Reconsider the Utilities
The utilities include electricity, gas, water, communication, and home entertainment. You can reduce the electricity bills by a number of ways including using natural light instead of bulbs, spending time in parks instead of watching TV, and saving water. Furthermore, the emergency calling services can replace the landline charges. Switch off the data from your mobile phones to save cost. Use the internet at places with free WiFi like home, church, buses, library, and some cafes.
Reconsider the Food
Food consumes maximum part of your budget, but it is also the most important necessity of life. Kids need proper nutrition for healthy growth. You also need to eat properly to work actively. However, you can still save a lot of money on food and grocery using these techniques.
- Use coupons to buy groceries.
- Always purchase products from thrift stores and stores offering sale.
- Buy in bulk to reduce the cost.
- Simplify your eating routine. Eat healthy, not fancy.
- Always cook food at home.
- Avoid buying cooked or prepared food. Make tomato puree at home instead of buying canned puree.
- For dining out, choose restaurants with deals and offers. A dinner at fancy restaurant may easily consume up to the total of your monthly grocery bill.
Did you take out a new car on your credit card? Do you spend more than 15% of your income on fuel? Reduce your fuel expenses to 15% of your income if you are spending more than 15%. After bringing it down to 15%, try to reduce the fuel expenses to 10%.
Spend more time at home. Go in the nearest park for jogging and evening exercises instead of going to the shopping centre. Use carpools for office instead of private cars. Buy second hand and fuel economic car instead of buying a fancy car on your credit card. Above all, reduce your credit card expenses.
Financial management is easier to plan on the documents and tougher to practice in real life. However, you can save more money by following the baby steps without even feeling the impact of these steps on your lifestyle. Saving money will also bring social responsibility and help you maintain a family of even seven people without taking out payday loan.