How to budget your monthly bills
How to budget your monthly bills
Budgeting will help your money go further and make sure you can pay your bills on time. It doesn’t matter whether your income changes from month to month or how much you’re earning - having a simple budget can always make a difference to your finances.
The great thing about the thinkmoney Current Account is that it budgets all the important stuff for you, be it bills, rent, or other monthly payments. To help your money go even further, we’ve put together some advice for your monthly bill budget.
How to budget money
The best way to budget your money is to:
1. Work out how much you need for bills
2. Keep track of your spends as you go
3. Plan for any added spends
4. Set targets for saving
5. Update your budget if anything changes
Why is it important to budget?
Budgeting your money is important as it ensures you have enough money to spend on your needs (such as bills or commuting to work) and things that are important to you (like a new phone or clothes). Here are some of our top reasons for budgeting.
1. Stops money worries
A lot of the worry around money stems from being unsure of what you can spend, so by putting together a plan you can get an idea of how to budget bills monthly. By having a budget, you can avoid the worry of wondering whether you’ll have enough money to last until your next payday, as your budget will tell you exactly how much money you have.
From a health perspective, mental health charity Mind recommends taking some time to organise your finances to help ease any anxieties you might have about money.
2. Put you in control of your finances
Following on from the previous point, having a budget will give you greater control over your money. Budgeting isn’t about conserving all of your money or following a strict regime of spending, but about creating a plan so that you can see where the money is going.
Once you understand how much you need to spend on bills, food, and other essentials, you can decide how much money can be spent on fun stuff and how much you’d like to save. By having a better idea of where your money is going, you’ll be able to start saving or spending more sensibly.
3. Reach your saving goals
Without a budget, it’s very difficult to start saving as you won’t have any idea of how much you can afford to save and when you should be trying to put away more money.
There will always be some weeks and months when you’ll have to ease up on your savings, and others you when you can save a bit extra. But by having a budget, you’ll be able to see how much you can realistically save and work out a sensible amount to aim for each time you get paid.
4. Prevent overspending
As soon as you’ve got a budget in place, you’ll be able to keep track of everything your spending, and one of the main benefits is avoiding going into the red by spending too much.
With a clear idea of how much you’ve got left until you’re paid again, you can work out how to budget bills monthly and how much you can afford to spend on non-essentials every day. An important point to consider is that the first month or so might be harder as you adjust to your new budget, but soon you’ll have the hang of it and find budgeting to be second nature.
How do I budget my monthly bills?
There are plenty of different methods to budget bills monthly, but for the best approach to budgeting for your monthly bills, we recommend the jam jar method. A lot of people like the jam jar method as it’s an easy way to start budgeting without having to break down your weekly spends right away.
The thinkmoney Current Account uses the jam jar method by putting aside money for your bills into a monthly bills budget and leaving you the rest to spend as you like.
How the jam jar method works
1. Work out how much money you spend on bills each month
2. Money gets separated out into separate “jam jars”
3. Bills are paid the remaining money is yours to spend
Advantages of the jam jar method
- Bills are always accounted for
- Clear understanding of how much you can spend
- Add more jam jars to make the budget more detailed (e.g. jam jar for petrol) Other budgeting methods
There are other budgeting methods that will help you pay your monthly bills besides the jam jar method, although most still have the same principle of keeping money for bills separately.
A lot of people like using the 50/30/20 budget. This method splits your money between needs like bills, wants like holidays, and savings or paying off debt. One issue with this method is that wants and needs items are often confused. In some cases, a new car might count as a need if you drive to work every day, but it might be that the old one works fine and counting it as a need isn’t smart budgeting.
We’d generally recommend going for a simpler budgeting approach like the jam jar method if you’re just getting started. But these methods can help your money go even further once you feel you’ve got the hang of your budget.
What do I do if I spend more than I have?
If you’re spending more money than is in your budget, you’ll need to have a closer look at how your money’s being spent and decide where you can cut back. All of us spend a little too much from time to time, so there’s no need to panic, but you’ll want to get organised so you can avoid doing the same in the future. Here’s what you should do to avoid spending more than you have.
1. Create a budgeting sheet
Having a budgeting sheet will allow you to go through all your spends and pick out any days where you’ve spent more than others. You can set it out in a notebook or using a spreadsheet on a computer, but either way, you’ll have a record of what you’ve spent your money on which will mean you can spot any unnecessary spends that you can cut back on.
Download our budgeting spreadsheet and get started now.
2. Find out what you spend the most money on
Once you’ve written down all of your expenses, you can have a look at where you’ve spent the most money. You can either look at the biggest individual purchases, or you can categorise your spends (e.g. food, clothes, travel etc.) and see which area of your life is costing you the most.
Remember, just because you’re spending a lot on something doesn’t mean you have to cut back. For example, if travel is costing you £100 a month but new clothes are costing £75, this doesn’t mean that travel is worse as it may be that you need to travel to work. In this case, the smaller expense is the one that can be cut out, so make sure to think carefully about where you can save money.
3. Set up a bills account for your direct debits and standing orders
Moving your money into a bills account will make sure that you always have enough money for bills, and that even if you start running out of cash, you can still pay for the essentials.
With a thinkmoney Current Account, your bills are automatically kept to one side in your account, so this step is taken care of for you without you having to remember to do it every month.
Want to start budgeting for your monthly bills without any hassle? Get a thinkmoney Current Account now and we’ll help you start budgeting your money and saving for the future.