The Importance of Budgeting

Posted on March 28, 2017

My name is Simon Alexander. I have been an associate at Atherton York for just over a year. I am a professional who moved to London in October 2016 with my now wife, Sam. As we are a newly married couple, we are eager to purchase our first home together but, equally, we really want to travel and explore different countries too.

Sam and I are both very aware of the importance of saving and budgeting. We both grew up in homes where we were taught its importance from a young age. We are two driven people, and in order to achieve our goals, we have had to budget and manage our money very carefully. We have found that budgeting is not always easy. There is the risk of being too conservative with your money and as a result, you may miss out on the enjoyments of life.  On the other hand, if you just spend your money as you please, it is difficult to save for your future. It has taken us a good year to try and reach a reasonable balance. Some months, however, we might have unexpected costs which may throw our this reasonable balance out a bit.

At the end of each month, we determine our budget. We first start by trying to predict the big costs that we may incur during the month. We have found that in order to try to achieve a reasonable budget, it helps to discuss and prioritise the things we want to do and the things we want to buy each month. We are a team and communication between us has been vital in trying to achieve our goals. If we were not on the same page, saving would be impossible and it could have potentially put a strain on our relationship. 2016 taught us that though saving is important, quality of life is equally important. One of our big goals for 2017 is to travel as much as possible. We want to push for at least once a month, but we are conscious that this may not always be possible.

Taking into account our predicted costs and including a financial cushion of about 10% of our predicted costs, we subtract this total amount from our combined monthly income. Any additional income is immediately transferred to our cash ISA account. We have chosen to place our savings in a cash ISA because we want to be as liquid as possible at this stage of our lives. As we are both still starting our careers and there are so many uncertainties from a financial point of view we tend to lean more towards being more risk adverse rather than risk seeking. We are aware that in the future as we become more financially stable, our risk tolerance will adapt. As we both have financial degrees, we are very conscious of the link between risk and returns so as our disposable income increases we will be more willing to take risks for potential greater returns.

With our current budgeting approach, we feel that we may be able to put down a deposit on our first home by the end of 2017. Even if this is not possible, we are happy with what we have managed to achieve financially after just one year of living in London and budgeting together. We have managed to save more than we initially thought we could and have managed to comfortably book tickets for holidays to Nuremberg, Prague and New York already during the first half of 2017!