Having a Budget is the quickest way to regain control of your finances and money. A Budget also helps you achieve your goals – whether that’s being able to buy a house or have a pot of savings for a rainy day.
So what is a Budget?
A budget is basically an amount of money that you allocate to spend on things in your life. For instance, you might be budgeting to spend no more than £100 a week on food and no more than £60 on petrol a week.
Using your income and your outgoings you can work out how much you can afford to spend on things. For your budget to work it needs to be realistic and you need to track what you spend. These days most banks offer a budgeting or tracking facility on their accounts, or if not, you can use a spreadsheet or just keep a note of your spending.
So let’s get you back in control of your money!
Just follow our Simple Budget Guide below:
List down all of your weekly, monthly and annual expenses. Then include an amount for food, entertainment, fun, birthdays and Christmas on top of your regular bills.
Top tip – you can get a list of your outgoings from your bank statement.
Here is a list of the outgoings that could be included in a standard household budget:
|Gas & electric|
|Rent / mortgage|
|Clubs & memberships|
Work out all of your costs on a monthly basis. If it’s a weekly cost like food shopping multiply the amount by 52 and then divide by 12. If it’s an annual cost like car insurance divide the amount by 12 months.
Add in your income. How much do you actually receive each month? If your earnings vary each month then work out the average amount you receive each month and use that amount.
Subtract your monthly expenses (step one) from your monthly income (step 3). How much money (if any) do you have left at the end of the month?
Depending on how much money you have left at the end of the month may mean that you want to change how much you are actually spending and set a budget for how much you want to spend going forward.
For example, you might have been spending £100 a week on food, but with a few changes like buying own brand foods and implementing a meal plan, you could cut those costs to say, £70 a week. That’s £30 a week for 48 weeks of the year which comes to a whopping £1140!
Why have we said 48 weeks rather than 52? Because you will have some weeks in the year where your food could be higher – think Christmas and Birthday celebrations.
If you need more help then here’s a couple of Budgeting Models that you could use:
The 50/30/20 Budget
Elizabeth Warren wrote about the “50/20/30 budget rule” in her book, All Your Worth: The Ultimate Lifetime Money Plan. The basic rule is to take your income and spend it like this:
50% on needs
30% on wants, and
20% to savings.
The good thing about this approach is that it REALLY makes you think about where you are spending your money and it forces you to make choices about what to buy, Plus you’ll be saving some cash every month. Winner!
Auto Saving Technique
If you have money left over at the end of the month then the best way to save is automatically. Set up a standing order to move money out of your bank account into a savings account every month. You won’t even notice that the money has gone – it really works!
Even if it’s a low amount, it’s still saving on a regular basis – which is great! And because it goes out automatically you won’t even notice that it’s gone (and you won’t be spending it). There is a great book which tells you more about this kind of approach called The Automatic Millionaire by David Bach which is definitely worth a read if you think this approach could work well for you.
You have been reading:
How to Set Up a Budget
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