You’ve seen it published on almost every financial website and advice guide going: drawing up a budget is a great way to manage your finances. But while it might seem like a brilliant plan to see your monthly outgoings and assess what you can actually afford, it’s common knowledge that a lot of budgets simply don’t work – why is this?

The problem for most people when drawing up a budget is that they only consider the very short term. Looking at the previous month’s finances and seeing it as a ‘typical month’ is many people’s most common way of working out their outgoings, but when do you have a typical month during the year? The answer is that there is seldom a time when more than two months during a year match each other in terms of outgoings. Have you considered your summer holiday, Christmas, children’s birthday? All of these things will probably hit your wallet in different months during the year.

A lot of people also get their budget wrong by not being specific enough in their outgoings and not doing their sums correctly. For instance, a lot of people consider their costs of the car in their budget. In some cases, some people just consider petrol, car insurance and annual servicing in a budget, but there’s far more to it than that. What about breakdown recovery, car tax, maintenance and parking? Furthermore, what about the times that you didn’t actually use your car to get somewhere, by using a taxi, train or bus – are these considered?

The key to any budget is to look through as many bank statements as possible to see where you have spent money. It might seem overly time consuming, but looking over six months of statements is probably the best way to do this.  There you can see how much you’ve spending on a particular area for six months, then break it down into singular months and even weeks as well. For an excellent spreadsheet to get everything you need into your budget, it’s well worth taking a look at Moneysavingexpert’s budget planner.

One of the key tips for you while thinking about your budget is to overestimate your outgoings, if you need to do any estimation at all. Fooling yourself by underestimation completely negates the whole exercise, and you’ll subsequently find that you’re short of cash.

If the outcome is worse than you thought, don’t panic. There are plenty of ways that you can adjust your spending habits rather than just cutting down on your leisure expenditure. How about consolidating your existing debts with a low cost loan? Some of the top rates for loans in the UK are from Alliance and Leicester, and these low rates can often be an effective way of getting out of credit card debt. Furthermore, switching providers on other aspects of your personal finances is also likely to help. How about reviewing your car insurance provider? ASDA Finance supply car insurance from a panel of insurers in a similar manner to a comparison website and independent research shows that more than half of their customers save.