Budgeting means you make a plan for your spending and take control of your money, rather than letting it trickle away without you realising. Sticking to a budget can be hard, and a budget is no good if you just make it and forget it. Here are a few useful tips to help you set a budget and stick to it.
Budgeting allows you to keep control of your spending once you’ve worked out your take-home pay. It helps you spend within your means so you don’t get into debt, and it can also help you if you are trying to save money to buy something big (like a new tablet, car, house, island, etc.).
How to make a budget
Building a budget is more straightforward than you might think. You can use a budget planner, Excel spreadsheet, or even an app! Here’s how to get started.
- Where does your money come from? Think about how much money you receive every month, including any savings, pocket money, or earnings. The total amount is your monthly income.
- Where does your money go? List the things you spend your money on, how much, and how often (daily, weekly, or monthly). For example, you might buy snacks daily, go out with friends weekly, and buy new shoes monthly. These are your expenses.
What is a ‘need’ and what is a ‘want’?
Review your expenses and income side by side. Whether you have more income than expenses, or more expenses than income, categorise your expenses into ‘needs’ and ‘wants’. This will help you identify the things you must keep money aside for, and the things you can probably cut back on.
How to stick to a budget
Here are some simple tips to keep you on track:
- Be realistic. Think about how much you spend now and your lifestyle. If you don’t leave any money in your budget for shopping but you’re a trainer addict, you’ll be sure to break it. It’s better to have a realistic budget that you stick to rather than an ambitious one that doesn’t allow you to use your money how you want to.
- Set milestones. A large savings goal can sometimes seem impossible, but breaking it down into smaller chunks can help. Instead of focusing on your final goal of £2,000, aim for £20 a month which actually only works out about £5 a week. Allow yourself a little treat whenever you hit your mini-goal, but don’t go overboard!
- Use an app. You need to have some way of tracking your spending to make sure you stay within budget. There are few better ways of doing so than with an app that you can take with you everywhere. They can help you set up a budget, give you reminders, and show visualisations of your progress.
- Create a system. Have a way of separating your money when you go out that you can’t forget about. Check out our link to a printable card below that might help you. You can also use banking apps to separate your money into ‘pots’ so you can only use what you actually have spare. Whatever system you choose, find one that works for you.
- Update your budget as you need. Your financial circumstances might change, for better or worse. Keep an eye on how it's going, and adjust your budget to meet your needs and goals.
- Account for special and unexpected occasions. Birthdays, holidays, nights out, and other special circumstances should all be factored into your monthly budget. Otherwise, when these occasions crop up, you might find your budget can’t handle it.
- Consider cheaper alternatives when you’re running low. For example, a party at home might be cheaper than going out; homemade gifts can work out less expensive than something shop-bought, and are often more meaningful; and learning how to cook your favourite take-out means you can eat it more often and only splash out for a special occasion!
- Avoid relying on credit. It can be tempting to turn to a credit card or delayed payment services like Klarna, but these won’t help you budget. What they’ll actually do is build up your bills so you have to pay more in one go later on unless you pay everything off straight away. You’re better off putting money aside to spend and using what you have.
Budgeting can be tricky and you might feel like you’re missing out on things that are going on, but stick with it! Missing out occasionally won’t feel as bad as realising you’ve run out of money at the end of the month!
Good stuff from elsewhere
Money Saving Expert's Money Mantra Card
Print out these two cards to help you when you’ve got some spare cash and when you don’t. Use them to ask yourself simple questions about your needs and budget before making a purchase and it’ll help you to stay on track.