How to budget
What’s the Best Way to Budget Money?
Managing your personal finances can seem like a daunting prospect, but getting on top of your money and learning how to budget more effectively can have a hugely positive impact on your life. Not only will you feel more in control of your bills, you could save money that can be used towards paying off debts or building savings for the future.
Make a Budget Plan
The first step of managing your money is to make a budget plan. This is time well spent as it gives you a valuable overview of how much you have coming in and how much is going out, as well as highlighting any areas where you can make savings.
Making a budget can also help prevent you getting into debt or being caught out by unexpected costs, and can be important in making improving or protecting your credit rating.
Where Do I Start?
Choose how you are going to create your budget planner. You could use good old-fashioned pen and paper, a spreadsheet, or one of the more advanced budgeting tools on the market. There are lots of free tools available online or as apps, and several banks offer budgeting tools to their customers.
However you choose to capture the information, you’ll need to work out your expenditure, including the following. Make sure use bank statements and bills to gather the information, rather than relying on yourself to remember everything:
- Household bills
- Living costs
- Financial products (e.g. insurance, credit cards, loans)
- Family and friends (e.g. birthday and Christmas presents)
- Travel (car costs, public transport)
- Leisure (holidays, sport, restaurants)
What Next?
If your outgoings are higher than your income, you need to look at ways you can make savings.
Look at things like reducing the frequency of eating out, cancelling memberships you don’t use (gym membership is a common one), or cutting back on takeaway coffees while you’re out and about.
A good way of finding areas to save money is to keep a spending diary for a few weeks, as this makes it easier to pinpoint unnecessary spending.
How Can I Save On Household Bills?
For most people, household bills represent the biggest proportion of monthly outgoings. It’s surprising how much can be saved by shopping around for better deals on things like mortgages and utilities. Comparison sites can be a useful tool, as they show you all the deals available on the market so you can compare them at a glance.
How Often Should I Review My Budget?
A budget should be something you revisit regularly, to take into account changes in circumstance like pay rises, price increases in regular bills or paying off a debt.