Budgeting Guide

Budgeting is a powerful tool that can transform your financial life. It can help you take control of your money and achieve your financial goals. Creating a budget plan can help you prioritise your spending, work on areas where you can make savings and reduce overspending. Our guide will help you learn how to budget money using helpful strategies. We’ll look at how you can build financial stability and ultimately set yourself up for a more secure future.

Calculate Your After-Tax Income for Accurate Budget Planning

The key to successfully budgeting money is to look at your net income after tax, national insurance and student loans (if applicable). After these deductions have been made, you can prioritise other essential spending such as mortgage/rent, utility bills and food shopping. The leftover income can be divided between your monthly spending on non-essentials (such as holidays and meals out) and your various savings accounts.

Track Your Monthly Spending for a Better Budget Plan

There are certain outgoings that will largely remain the same each month. This includes expenses such as utility bills, mortgage/rent and food shopping. You should be able to calculate the average you spend on bills and other essential spending to help with budget planning. You should also include other essential expenses in your budget plan such as car expenses (like petrol and insurance) before looking at your remaining outgoings.

There are some outgoings that may be fixed every month, such as subscriptions to streaming channels and mobile phone contracts. After you’ve deducted these fees, you can look at other outgoings including eating out and clothes shopping. If you decide you’d like to save more, you might decide to restrict your spending in one of these areas. You could reduce the number of subscriptions you have or limit the number of times you go out for a meal each month to save money.

Set Realistic Savings Goals in Your Budget Plan

It’s a good idea to decide on both long-term and short-term financial goals in your budget plan. For example, a short-term goal could be to save for a holiday, while a long-term goal could be to build your savings so you can retire when you’re 60. Your financial goals can be big or small: the main aim is to make them as attainable as possible. Setting goals that are too difficult can make you use motivation or disrupt your overall budget plan. You can make other small changes too, such as choosing low APR loans so that you have less interest to pay each month.

How to Create a Financial Budget Plan

The first step to budget planning is to look at your income. Consider how much you spend on essential expenses such as utility bills and mortgage/rent and deduct these from your income. While you can switch providers, it’s difficult to make cuts in these areas, which is why it’s helpful to make savings with your non-essential expenses.

Your budget plan should look at your current spendings to help you identify where you can make changes. The more you want to save, the more spending you’ll have to try and adjust. For example, you might decide to cancel subscriptions you don’t need or limit the number of times you go to coffee shops during the month. It can help to give each expense a rating so that you can prioritise some expenses over others.

It can help with budget planning to use apps or spreadsheets to keep track of your spending and savings. This is a good way to find areas where you’re overspending and take the appropriate measures to help you with reducing your monthly bills.

Use the 50/30/20 Budget Plan to Manage Your Money

An easy way that you can learn how to create a budget plan is by using the 50/30/20 rule. This rule suggests you use 50% of your net income on essential needs, such as bills and debts. You should put 20% of your net income in savings, leaving the remaining 30% for things that you don’t necessarily need but want. This includes things such as meals out and holidays.

Track Your Progress & Adjust Spending to Stay on Budget

You should review your budget regularly to keep on top of things. There are a number of budgeting apps and templates available if you’d like some help with tracking your budget plan. You should regularly review your transactions and identify areas that are deducting more money than you’d like. Seeing your spending in black and white can help you work out where you’re overspending. A little treat here and there costing only £10 may not seem a lot, but eight ‘little treats’ over the course of a month racks up to £80!

Review Your Budget Plan Regularly for Success

The best way to stay on track with your budget planning is to review it regularly. You can make tweaks here and there that impact your budget, such as a pay rise or starting to make payments towards instalment loans. You can also add new goals to aim for, like buying a house or retirement. Once you’ve reached set goals (such as a holiday), you can take that goal off your budget plan and add a new one.

Budget Planning FAQs: How Can I Budget My Money?

How do I prioritise my spending?

You should always look at your essential bills first. These are things such as your mortgage/rent, food and utility bills. While you can do without a new top, you can’t do without food or running water. You also need to consider debts and credit card payments. Not repaying loans will affect your credit score and it can take a lot of work to improve your credit score once it’s dropped.

After you’ve looked at your essential expenses, you should put your budget amount into savings. If you’re using the 50/20/30 budget plan, this should be 20% of your net income.

The leftover income can be spent on things that you want rather than need. This is the area that you will usually make adjustments in as it’s the leftover income after your essential expenditure and savings. You might have less disposable income in certain months if you have unexpected bills, such as car repairs or vet bills.

How should I review and adjust my budget?

You can use a simple spreadsheet to keep track of your incomings and outgoings. Alternatively, you can find apps and templates online that can help you. This budget plans can help you identify areas where you need to make slight adjustments.

How can I stay motivated to stick to my budget?

You should set clear, attainable financial goals. It’s easier to stay motivated if you set smaller goals than ones that seem too large or distant. For example, rather than set a goal of saving enough money for five holidays over the next 10 years, you might decide to set a goal for one holiday the following year.

What should I do if I go over budget?

Don’t panic! You may find you have unexpected expenses that push you over budget. The important thing to do is make adjustments in the following months to try and help you regain control. This could mean cutting down on your non-essential spending the following month to top up your savings account. You should always try to cover your essential bills each month so that your credit score isn’t affected.