A Beginner's Guide To Budgeting

The Value Of Money

What is the value of money? This concept can be buried at the back of people's mind when they fall in love with that brand new jacket or gleaming car.

The real question is, can you afford it and do you really need it?

Fine if you can, but how do you know that you can? This is where budgeting comes in handy. It is no good blindly purchasing things if you don't know where you stand financially, is it?

Learning to budget is a basic fundamental to life. We are not taught how to do this, we simply learn with experience. We all have to start somewhere and this Beginner's Guide To Budgeting will show you how to achieve this in a practical way.

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Budgeting The Old Way

Long before computers and Internet banking, people used a manual budgeting system. This taught them the value of money in a practical way. They would get paid weekly in packets and on pay day would allocate the money they earned to the various people and places via a simple system.

Many did this by dividing the cash into pots and jars labelled with the person, organization or thing. They would save up their hard earned money and pay bills when they were due.

These jars were often hidden for security reasons, often under lock and key like a bureau, but as bills and pay came to the household regularly, the money didn't hang around too long.

This made budgeting easy because the money was there when needed. It helped people to understand the value of money in a practical way because they would physically earn the money, allocate the money and distribute the cash when needed. Of course, a realistic budget for each jar was set for the division of the weekly wage.

Budgeting in this way is as effective then as is now. You just need to learn how to adapt it to today's society.

1. Calculate Wages Into Weekly Cash Withdrawals

2. Number, Label And Write Your Chosen Weekly Budget On Your Jars

Credit Cards - Avoid!

If you have a credit card, stop using this immediately.

You are learning to budget and a credit card defies the concept because it can lead to debt.

If you do use a credit card, make sure you have a jar specifically set up for repayment so you do not incur charges that you haven't accounted for.

Personal Weekly Budget Planner - Priorities

Firstly, you will need to divide your monthly pay into weekly components and withdraw the money from your bank account on the same day every week. This is about getting into a routine where it becomes normal to do this. We are, therefore, creating a behavior that will keep you in good stead for the future and teach you the value of money.

Secondly, you need to prioritize your financial commitments. I would suggest the following list as a good guide starting with number 1 as the highest order in priority:

  1. Rent or Mortgage (you need to maintain a roof over your head, homelessness is not an option)
  2. Tax : Community Charge, Council Tax, Income Tax Office (if you don't pay this they have the power to send you to prison and take away your possessions).
  3. Utilities - Electric (The utilities are a basic human need - you need to keep warm, be able to cook and keep clean).
  4. Utilities - Water
  5. Utilities - Gas
  6. Maintenance Charges - alimony etc (Including Medical Insurances)
  7. Food (You need to be able to eat)
  8. Telephone
  9. Clothing
  10. Travel Costs
  11. Insurances : Life Insurance, Endowments etc
  12. Child Care Costs
  13. Pension Contributions
  14. Debt Repayment (including credit cards, personal loans etc)
  15. Leisure and Joy (for example, going out, magazines, coffee out, gym, holidays, lottery tickets)

3. Divide Your Weekly Cash Withdrawal Into Jars

4. Pay Your Bills And Expenses With Cash Over The Counter

Decide, Sub-Divide and Allocate

The above list has given you some ideas. Now all you need to do is decide how much, realistically, you need out of your weekly pay for each of jars.

You need to work in the prioritized list order to allocate the funds effectively and label your jars with the priority number, title and how much you are to deposit per week.

It might be that you, for example, run out of money by point 12, at which as you will need to curb your spending and find ways to cost cut elsewhere.

Or you might have a huge excess for which you can save for a rainy day or create a new jar for something you really want, like a new car perhaps?

Later you can just take this jar and deposit the money to a bank with a competitive interest rate - making money on money!

Whatever, this list has been designed to help you allocate the right amount of money to the right causes.

  • Pay for food with cash
  • Pay over the counter with cash
  • Pay on a bill or invoice with cash from your allocated jar at a bank or post office
  • Avoid paying with direct debits, unless you have to (for example rent or mortgage) and if you do, make sure you save for it in your jar, then place it in the bank just before the due date with the exact money going in as going out.

Arrange To Pay Bills With Cash And Over The Counter

For the purpose of this exercise, it is probably best to pay your bills more frequently, with cash and over the counter.

This will help you learn the value of money and will enable you to feel the experience - hard earned cash is being spent on your commitments! It is all too easy to lose control of finances when you pay with direct debit and credit cards because 'out of sight' can mean 'out of mind'!

The convenience of credit cards can trick you into spontaneous spending and get you into debt. This doesn't teach you the value of money.

The experience of budgeting with cash only does teach you the value of money and makes you question yourself:

'Do I need it? Can I afford it? Do I REALLY want it? If I do, where can I get it cheaper - for cash!'

Learning The Basics

People best learn through experiences. If you follow this article and you have had no real experience of accounting or budgeting, you will find that this tactic will keep you in good stead all of your life. You are creating a behavior that teaches you the value of money and to respect it as a tool. Remember, this is a beginner's guide to budgeting and it is a start. Later, once you have truly grasped money's value, you can progress to other forms of accounting that does not involve dividing cash and allocating it into jars because you would have learned the basics. Good luck!

© 2012 Shazwellyn: This work is covered under Creative Commons License

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Comments 6 comments

DreamerMeg profile image

DreamerMeg 4 years ago from Northern Ireland

Learning to handle cash is SO important. You're quite right that credit and debit cards mean out of sight, out of mind until it comes to the point of being afraid to open the post!


shazwellyn profile image

shazwellyn 4 years ago from Great Britain Author

Hi DreamerMeg, it is so important to learn through experience these budgeting techniques... traditional methods have been tried and tested with not much to go wrong except for the person who is using it!


caribbeanmedskuls 4 years ago

Guilty as charged on credit cards! I am heading out now to buy that pink piggy bank and rummage through the attic for my mother's cookie jars... thank you very much for another great hub!


RodniGalloway profile image

RodniGalloway 4 years ago from Summerville, SC

We need more hubs like this....Our society is steady declining in this particular area...Thanks much!


Julie DeNeen profile image

Julie DeNeen 4 years ago from Clinton CT

Lots of great tips here. Very thorough!


shazwellyn profile image

shazwellyn 4 years ago from Great Britain Author

Thank you for your lovely comments Julie, RodniGalloway and carribean for supporting my article. Wishing everyone health and abundance!

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