It’s Day Four of Jump Start January, and today we’re going to be setting up one of the most powerful money-saving systems available to us. Today’s activity is to create a simple budget for the rest of the month.
[By the way, if you already have a budget in place, today’s a good opportunity for you to check through and revisit it.]
The aim of a budget is to help you spend less than you earn, so that there’s a bit of money left to save, pay off debts or invest.
Start with the amount of incoming money. For most people this will be monthly wages. There may also be freelance income, money from part time jobs or side hustles, benefits, or child support, etc. Add it all up – this total is what you have to budget from.
Once you know how much money you have coming in, start working out your budget for what’s going to go out.
Start with fixed or essential costs: important things like mortgage or rent, council tax, a travelcard for work, nursery fees, insurance, and repayments for loans. For most of these you’ll know exactly how much they cost.
Then move on to the more variable costs, where you can be more flexible with the amounts spent:
- Food, drink, toiletries, other groceries
- Fuel, water, phones, internet, other utilities
- Health care, prescriptions, optician, dentist
- Entertainment, going out
- Clothes, accessories, makeup
- Services: hairdressing, gym membership, dry cleaning, school trips etc
- Running costs for car, other travel
- Credit card or other debt* repayments
- Money for emergency fund, general savings, other savings
Allocate amounts for each category in the variable costs list above. You might need to juggle them around a bit so that it all adds up, and look for a few places where you can cut back.
Make a note and keep checking back
Write it down, add it to a spreadsheet, or put it into a budgeting app. Free apps include Budget Tracker from CAB or Toshl Finance Expense Tracker.
Now you can refer to your budget on a regular basis, and try not to overspend in any of the categories.
*If you have quite a lot of debt, focus on meeting at least the minimum repayments when you’re making your budget. Ideally, pay off an amount greater than the minimum so that you can clear the debts quicker, and make them more of a priority than adding to your savings. We’ll be looking more at debt tomorrow, so don’t panic if you find it difficult to balance the books today – just do your best.
Do you usually make a proper budget plan each month? Or do you budget a bit so you don’t go overdrawn, or not budget at all?