We all experience times when we get into debt – or, at least, more debt than we are comfortable with. It could have been an emergency situation like needing to pay for repairs to our home or needing to buy a new car to get us to work. But often enough it can be put down to bad spending habits and not knowing how to budget effectively – it is so easy to be tempted into spending more than we can reasonably afford, especially when we have some spare capacity on a credit card. But then the reality of having to pay off that debt hits hard and what we have to show for it is probably very little in the greater scheme of things.

Budgeting effectively requires steely determination, avoiding the shops and avoiding online shopping, especially late at night when we can make irrational decisions. It means only buying what you really need not all those extras that are not essential.

The one type of online shopping that does help when you are looking at how to budget effectively is grocery shopping. It is actually quite helpful to get to the end of the shop and then be able to review your trolley and remove the non-essentials to cut down your final bill. Something you can’t really do at the checkout in the supermarket.

No one has ever said it’s easy – it takes serious levels of discipline, but everyone can learn how to budget effectively. Here are some of the best ways to do just that:

Using An Envelope to help you budget effectively

Create a list of all essential household expenses, food, utility bills, loan repayments etc. then allocate an amount for every item – don’t be tempted to under-estimate the true cost. If anything exaggerate the cost.

Now take several paper envelopes, label them and place the cash for each item inside, seal them and only open them when you are at the bank counter ready to make the payment. Actually setting the cash aside will also help you realise just how much each item is costing – making the debt seem more real. It will especially highlight just how much you are paying in interest on your debts, particularly if you had to take out short term  loans for bad credit situations.

Eliminate Unnecessary Subscriptions

Do you have subscriptions for TV channels you never watch or a gym you never go to. Budgeting effectively means cancelling all those subscriptions you don’t need. Start by making a list with the monthly costs next to each item and work out how much you could save just by cancelling even one of those.

Open a Second Bank Account

This can be with your existing bank but just open a second account so you can put into it all the money you need to cover important expenses like food and rent or mortgage payments. Every month when you receive your salary put the amount you required in the separate account – it’s a bit like using an envelope – so you’ll need you list of how much each essential item costs.

Don’t forget you will also need to try and save an emergency fund so you don’t end up needing another short term loan.