How to create a budget

Whether you're saving for a big purchase or just want to feel calmer and more in control of your finances, creating a budget can help.

Knowing how much money you've got coming in and going out - as well as where it goes - can help you prioritise spending. This means you can make your money last and save more each month. 

How to start budgeting

1. Decide your budget format

An app or spreadsheet can be a great resource, but a notebook and pen can work as well.

2. Note your income and expenses

Take a look at how much money you have coming in on a regular basis, like your salary. If your income changes from month to month, work out the average over the last three months.

Then, looking at your bank statements for the last three months, work out your average total amount of spending. By comparing your income and your expenses, you'll see if you're living beyond your means or if you've got money left over.

It can be helpful to put your expenses into categories so you can see specific areas where you may be overspending. These categories should include regular outgoings like:

  • bills (eg utilities, phone, internet)
  • rent or mortgage
  • groceries
  • eating out
  • shopping
  • transport

3. Make a plan

If you feel you're spending too much or just want to save a bit more each month, look at what you can change. You can try making small adjustments like bringing your own lunch to work. Or consider making bigger changes like switching energy supplier.

Once you've decided where you'd like to make changes, set yourself a monthly (or weekly) goal for spending in each of the categories you've created.

Try to account for irregular costs too and allocate a certain amount for them at the start of your budgeting period. This can be things like:

  • renewing your car tax
  • booking flights
  • hosting your friends for the weekend

And if you have money allocated for savings, move it into a savings pot or account as soon as you get paid. This way you're not tempted to spend it elsewhere.

It’s good to aim high, but be realistic: making things too hard may mean you get quickly disheartened.

4. Stick to the plan

As you go, make sure you're staying on track. It can be helpful to look over your budget regularly to make sure you’re following the plan you set out. You might want to try using a specific budgeting app which can look at your spending more closely or setting a time to sit down and review your money every week.

Setting yourself limits in each of your expense categories can help you keep your finances in line. It also helps you to see where you’re overspending and where you can make changes to fix this. 

If you need advice on your finances, arrange an individual review with us to see how we can help.

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