If you have trouble keeping your spending under control, you can end up getting into all kinds of difficulties. However, there are some simple techniques that you can use to take control of your finances. One of these is the piggybank technique, and here is a guide to what this is and how you can get started.
Get Started with the Piggy Bank Method
Getting started with piggybanking is easy. It is based around the idea that while creating your budget may be easy enough, sticking to it is a challenge. The piggy bank method helps you to stick to your budget.
First of all, you need to remember that you have to match your lifestyle to your finances and only spend what you can afford, so make a simple household budget to help you. Work out what you can afford, then use this to guide your decisions.
Open Different Bank Accounts
Once you have created a budget, look over it and come up with a selection of categories of spending that you have. This could include bills, clothing, holidays, Christmas, etc. Try to come up with about five or so categories.
You know how much you want to spend on these categories over the course of the year, so now you need to open a savings account for each of the categories. Each savings account then becomes a piggy bank.
Set Up Standing Orders
Once you have set up your piggy banks, you need to set up standing orders from your current account. You do this by working out how much you need to send to each account over the course of the year.
For example, you may want to put aside £1,000 for your summer holiday. You will therefore need to set up a standing order for £83 a month, which will add up to £1,000 over the course of the year.
Do the same for each category of spending that you have set up.
See What’s Left
Once you do this, you will immediately see what is left for you to spend. You have taken out all of the money you need for the various categories, and what’s left is what you can spend in the month.
If you are left with nothing, then this means you are spending too much on some categories, and you may need to reduce the cost of your Christmas spending.
What About Borrowing?
Of course, some expenses will be unexpected, or sometimes you won’t want to save up for years before making a purchase. In this case, you may want to borrow money.
Even if you don’t have a great credit score, you can still get bad credit loans. There is nothing wrong with taking out a loan, as long as you can afford to pay it back. You could even create another piggybank account for paying back the loan each month.
Choose the Best Accounts
That’s the basic idea behind this method, and it is not hard to do. However, one useful tip is to choose the best savings accounts to make your money work harder.
If you can find savings accounts with higher rates of interest but that still allows you to access your money when you need to, you can make your money go further. So have a look around, compare accounts and choose the best savings accounts you can find.
Georgina McCarthy was a shopaholic once upon a time, but now a Mommy on a very strict budget she had learned how to tame her ways and saves instead of spends.