How to create a budget

How to create a budget

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The path to financial stability and savings always starts with creating a budget. No matter your goal, you can begin making your way toward it by assessing your incomings and outgoings and then coming up with a plan for each month.

If you’re ready to get started with budgeting right away, you download our budgeting spreadsheet and see how your finances are stacking up.

How to make a budget

The easiest way to make a budget is to tally up your income against your outgoings and see if you’re breaking even. Once the budget is set up, you can see where more money is being spent and how you can save.

How to make a budget

The easiest way to make a budget is to tally up your income against your outgoings and see if you’re breaking even. Once the budget is set up, you can see where more money is being spent and how you can save.

1. Work out your bills and due dates

Your first job is to work out how much you’re paying on bills and when they’re due. You should typically start with:

  • Rent/mortgage
  • Gas and/or electricity
  • Water
  • Loan repayments (e.g. credit cards)

Once you’ve figured out which bills you’re paying and how much they are, you should make a note of when they are due. You should then set up direct debits or standing orders for these dates if you haven’t already, as this way your bills will always get paid on time.

After considering your bills, you’ll want to think about any other regular payments that you’re unlikely to change moving forward. This could be anything from subscription payments to licence fees. Additionally, you’ll want to add any regular payments that might go up and down each month, but that you’re always going to be paying (e.g. food shops or petrol for travel).

2. Get your earnings together

If your earnings come from several different sources, you should make sure that you’re accounting for everything. Whether it’s because you get paid into different bank accounts or get paid in different forms (e.g. by cheque), try to keep tabs on what money you’ve got coming in each month.

Furthermore, if you’ve got any money coming in besides your pay, you should make a note of this in your budget too. This should include any benefits or gifts, and remember that if the amount changes, you can go back to your budget and make changes when you need.

3. Be accurate about spends

When planning your budget, there’s no use hiding any spends that you’d rather not be there. Part of learning how to manage a budget is finding the areas where you’re spending too much or too little.

Removing any weekend splurges from your spreadsheet isn’t going to make them go away, so include everything and see how it tallies up at the end. Everyone starts out with a budget that is far from perfect, so make sure to be realistic when adding estimated spends to your budget.

Equally, you shouldn’t beat yourself up if you can’t reach your saving targets right away. It might be that you have a loan or credit card to pay off beforehand, and you should see this as part of the same process. It can seem like you’re a long way off saving when this happens, but in reality, by taking this step you’re already well on the path towards putting money away for the future.

4. Include one-off spends

Budgets aren’t designed to be inflexible, so if you’ve got any one-off spends coming up, be sure to include them in your budget for the month ahead. It can be tempting to see expenses like holidays or new cars as existing outside of a regular budget, but it’s actually better to include them and see how it will impact your money.

5. Think about the goal of the budget

When setting up your budget, you should keep in mind what you’re trying to achieve. There are three common goals for people who want to start using a budget:

Pay off debt

For people looking to pay off debt, a budget is the perfect tool as it allows you to see where you could be reigning in the spending in order to take care of your debt.

Save money

Saving money becomes much easier with a budget as you can set targets each month rather than simply putting away whatever you have left before the next payday.

Keep track of spends

Even if you’re not looking to save, a budget can be great for keeping an eye on your money, especially if you’re concerned about too much going on in one area of your life.

For extra help managing your budget, you can sign up for a thinkmoney Current Account and let us help you sort your monthly bills.