Long term budget

Tryingagainandagain

Hi - I am trying to plan out a budget for the next few years.

At the moment I can't work due to a health issue - not sufficient to claim sickness/incapacity benefit but I simply can't find a job that I am able to do with my current condition. I am undergoing treatment and retraining but this will take a year. During this time I am also able to spend time with a relative who is in poor health so I can't complain. If I find a suitable job I will probably take it (there are so many ifs and buts in my life that I am reluctant to commit to any course of action)

I am lucky in that I can support myself. I recently took my company pension early and although money will be tight, even if I cannot work for a two or three years I will be okay. I plan to eventually become self-employed and work as much or as little as I have to or want to.

I am trying to draft a long term budget for the next three years. It needs to take into account possible increases in tax, utilities, food, fuel. It doesn't need to be accurate as it is to keep me from frittering away my funds.

I will try to minimise my spending against the budget for a challenge and any money outside the three year plan will be put into a medium term investment where I am not tempted to spend it.

I have a "today" budget.

Does anyone have any views as to how much I should add in to cover increases in everything?

I originally thought 10% as inflation looks set to stay low but utilities etc are ever-increasing.

Any suggestions?

InsideInsurance

It would depend on how specific you want to be? Both measures of inflation are currently at just under 3% and given the target of keeping it there it is unlikely to be allowed to stay at a high level for a long period of time. A 5% PA load would be a more realistic universal figure to use.

That said, different elements have different rates and so it depends if you think your split of spend between fuel/ food/ clothes/ transport etc mirrors the norm used in the inflation calculations or if you are more fuel heavy but say clothes light in which case find the inflationary measures for each one and taking a slightly pessimistic view on each would give a safer result.

Tryingagainandagain

Thank you for your reply.

It really doesn't need to be accurate or specific as it is simply a way of assessing how much money I should keep accessible for each successive year (not too accessible or I will be tempted to spend it).

Hopefully I will be back at work long before I need to worry about next year's budget but pain and restricted movement limit my ability to work (I got a job really quickly then had to give it up as I was taking sick time - most other locally available jobs seem to be similar in nature).

I will be go forward with 5% as I plan to stretch myself this year anyway. Any "savings" I make will be put away where I cannot spend it. Then if it turns out to be an underestimate there will be a cushion.

It's all very artificial I know, but in the past I've managed to go through relatively large sums with nothing much to show. I cannot do that again.