How to Create a Budget 

Budgets might sound like they’re reserved for business, but creating a budget is actually super helpful for daily life: it’s a great way to keep track of your spending. Getting to know just where your money goes each month will help you get your finances in order and prioritise saving (if that’s your aim). 

Here’s how to get started: 

1. Choose Your Medium 

Whether you’re an old hand or entirely new to budgeting, it can be hard to figure out where to begin – particularly as, nowadays, there are a plethora of apps, websites and different platforms with budgeting tools. If you’re not really into tech, don’t panic: a pen and paper works just as well! The most important thing is to choose a medium with which you’re comfortable, and that you can access and update with ease. 

2. Work Out Your Income 

Now you’ve got your pen (or keyboard!) at the ready, the most important thing to do is calculate how much money you make each month.  

The figure you need is your net income (the amount you earn less taxes). If you work on a PAYE basis, this will be your ‘take home’ pay. If you’re self-employed, however, working this out can be a little trickier. First of all, you’ll want to subtract an amount from your gross income and set this aside for your tax bill (thus leaving you with your ‘net’ income). Second, if your income fluctuates from month to month, you will need to average this out: we recommend adding up three months’ net income and dividing by three to produce an estimate. 

3. Calculate Expenditure 

Next, it’s important to list your monthly expenses. You’ll need to include everything here, from miscellaneous items (birthday presents, for example) to common expenses. These include (but aren’t limited to): 

  • Rent or mortgage payments 

  • Insurance 

  • Utilities 

  • Loan repayments 

  • Landline and broadband 

  • Mobile phone 

  • Childcare 

  • Subscriptions (such as Netflix, Spotify, or your gym) 

  • Groceries 

  • Travel 

If you typically put a certain amount into savings each month, you should also list this figure here. 

4. Label Expenses 

Now you’ve got your list of expenses, it’s time to dig into these a bit more. Are they set in stone or more flexible? This is really important; because, whilst you can make cuts in certain areas (if you so wish), there are some expenses you just can’t avoid – like your monthly rent or loan repayments. These are your ‘fixed’ expenses.  

Variable expenses, by contrast, are a bit more flexible: money you set aside for leisure activities, for example (such as eating out), or any non-fixed contracts (like an Amazon Prime subscription).  

5. Make a Plan 

With all this useful information in front of you, you’re now able to make a solid plan – which is why having a budget is so helpful. It can be tailored to your goals: perhaps you feel you’re living beyond your means, or you simply wish to put more in savings each month, or you’re thinking of making a big purchase (taking out a loan for a new car, for example). With just a few small adjustments (using some smart food hacks to trim your weekly grocery bill, for instance), you’d be surprised how far you can make your money go. Simply set yourself a limit for spending in the relevant category, and try your best to stick to it! 

Don’t forget to account for seasonal or one-off costs, too – like birthdays or Christmas. If you can move your monthly spending ‘goals’ around to accommodate these irregular expenses, you’ll find the process much more manageable and will be able to stay on track. 

Final Thoughts 

It’s one thing to set a goal – but another to stick to it! However, there are some easy ways to hold yourself accountable. First of all, keep on top of your budget: input your expenses as soon as you’ve made a purchase or spent any money, so you’re able to keep track. Consider moving any allocated savings into a separate account as soon as you can (to remove the temptation to spend this ‘extra’ money!).  

Finally, be kind to yourself. Aiming high is noble, but if you’re too restrictive, you’ll find it hard to stick to your budget and may get disheartened. Be sensible, but reward yourself with little treats: you deserve it!