You’ve worked hard on your budget. You’ve categorized all your spend, analyzed your habits, calculated your expected savings. You spend a month obsessing over every withdrawal, every expenditure. Your discipline is a thing of beauty. But can you stick to a budget long-term?

A couple of months later, the budget’s in tatters and you’re not entirely sure what you could have done differently.

It happens to the best of us. It happens to all of us. Most of all, it happens to the people who don’t admit it happened to them. So don’t listen to that blogger flexing in the corner next to a picture of a Maserati that he doesn’t own.

You need two things. The first is to forgive yourself. You’ll get past this, we all do. The second is some new methods of self-control.

Let’s get into it.

One day, hopefully soon, you’ll reach that magical moment when you pay off the last of the debt and all the money you’ve been putting towards debt repayment no longer needs to go there. What now?

This is a fairly critical moment. The direction you set is likely to define what happens in your financial life going forward. You are faced with both risks and opportunities.

If you’ve set up the first three parts of the five-step plan appropriately, you should have a clear path to success in front of you.

By now you have

• A monthly budget that allows you to live within your means
• A system for keeping track of your costs, giving you the tools to stick to your budget
• An emergency fund with three months costs saved up, giving you a safety net in case anything should go wrong
• An amount of cash left over after your costs each month, which you will be using to pay down your debt

You now have a long, hopefully fairly straightforward path to being debt-free in front of you. We just need to calculate how long it will take us, and engage a process of continuous optimisation.

By now, if you followed step one and step two, you have a budget that, provided you can stick to it, throws off extra cash every month.

The temptation is to start paying down that horrible debt as fast as possible.

For the long-term success of your plan, however, it’s very, very, very important to build an emergency fund first.

So before you start paying down your debt, build an emergency fund. It will be good for your mental health, for your confidence and the for long-term success of your journey to a debt-free life.

In this step, we’re going to do most of the preparatory work for your journey out of debt. This mostly involves preparing a budget and sticking to it, but we’re going to go into a little more detail than that.

We’re going to do three things.

• Draw up a monthly budget that’s sustainable over the longer term
• Calculate how long it will take to work your way out of debt given the budget you’ve chosen
• Choose the methods you’ll use to track your progress and stick to your budget over the duration of your journey

You should have your minimalist budget that you prepared during the first step nearby as you’ll need to refer to it.

Let’s get started.

You’re at start of a journey, but in many ways you’ve made the most important decision. You’ve decided to do something about it. In this first step we’re going to build a minimalist budget that exposes the hard inner core of our most unavoidable expenses.

You’re at the point of maximum frustration. You’ve tried a few things but realise that you need a more organised, comprehensive approach. You’ve finally decided that you have to do something about your debt situation.

But where to start?

There’s only a certain amount of effort and energy you can dedicate to a task. As you probably know from bitter experience, if you don’t put your effort in the right places, and you don’t see some results, you’ll get discouraged and it will become impossible to continue.

Flicking through websites, we find many people who claim to have paid off staggering amounts of debt in record time. They make it seem almost too easy. Just download their printable and you’re home free, right? But you already know that’s not how it works.

You can’t transform a difficult debt situation into a debt-free life at the flick of a switch, or by applying a simple “life hack”. It’s going to take time, effort and a plan. The plan focuses your effort where it has the most effect and helps measure progress towards your goal.

Before you leap, take a step back. Take control of the smallest and easiest and most essential thing of all: Your day-to-day essentials. Draw up a minimalist budget of your most essential costs. This will give you an idea of what it’s possible for you to save each month.

This article explains how.

I’ve been fairly silent for a couple of weeks, and there’s a good reason for this.

I’ve been brushing the dust of some old coding skills to design a budget tool for an upcoming series I’m going to call 5 Steps To Taking Control Of Your Finances.

The tool is designed to help you in a number of ways:

• Design a budget with a logical structure
• Take daily, weekly, monthly, quarterly or annual numbers and make them comparable easily
• Not accidentally forget any categories of spend by listing them out for you
• Provide a clean and printable output
• Generate some basic analysis of your budget for you to look at
• Save the budget so you can return to it later or share it with others

Read on to see what the tool does and for the link to use it – it’s free!

When we start examining our spending, it’s usually a good idea to take a month or two to do a detailed spending analysis. This typically involves recording and analyzing every aspect of our expenditure to capture all our expenses, including those that typically slip under the radar.

Once we’ve done that, we execute a turn, a motivated, coherent adjustment to certain aspects of our financial lives. This includes things like

• Setting up and paying into an emergency fund
  
• Picking budget categories to tackle and setting up projects to tackle them (groceries, utilities, etc)
• Scheduling a half-day each month to do the next month’s budgets, incorporating lessons learned so far
• Finding new sources of income, or enhancing existing income

Going forward, we’re going to need to keep track of our spending and our financial improvement efforts, to make sure the effort bears fruit.

It’s not realistic to continue to monitor every single aspect of your spending, because that takes too much time and effort, and you have more important things to spend your discipline and attention on than recording the fact that today’s commute cost you £2.40.

You need to find a long-term budgeting and tracking exercise that works for you.

Are you an obsessive bank balance checker? That’s a bad habit that you should probably replace with a few good habits I’d like to tell you about.

A common question when you start tracking your spending is: How do I choose which budget categories to use?

Some categories are very obvious, but overall you can end up with too many categories, or categories that are less useful in your attempts to adjust your spending. Since this is the source of all the information you use to control your spending, it’s important to get it right.

Remember: Recording your spending is only a tool, and you need to make that tool as useful as possible.

How does an exercise like budgeting miraculously transform your monthly finances from a source of anxiety and stress into a solid platform for achieving your goals as an individual or as a family?

The short answer is that it doesn’t. Budgeting, and it’s bigger sibling, Financial Planning, are merely tools. Properly applied, these tools allow you to take control of your finances by organizing how you will earn and spend money. They allow you to identify opportunities for recurring savings and give you a way to plan your way out of a financial deficit, or into a position of financial strength.

Let’s take a closer look at the process and how it can help transform your financial situation.

You know how you spend your money, right? After all, every time some money leaves your account or your pocket, it’s due to a decision you made.

Well, it turns out things aren’t quite that simple. For a number of reasons your grasp of your finances is likely to be a lot less precise than you think. In fact, unless you’ve carefully measured your own spending habits, you probably have quite a misleading idea of where you can save, and what you spend too much on.

This first step is designed to get you a little distance from your spending, so that you can take a new look at what your cash is spent on.