Some of the links in this post are affiliate links. This means that if you click on them and make a purchase I may receive a small amount of money at no additional cost to you.
There was a thing that happened on Twitter a little while back where you would write “Yeah sex is cool but…” and then follow it up with something like “but have you tried my homemade chocolate brownies?”
Well for me it’s “yeah sex is cool but have you ever put together your own budget?” Because I bloody love budgeting. No reflection on the husband.
A good budget is your passport to freedom. It is what will liberate you from the constraints of debt or the job that you hate. It can give you more time with your children or the chance to travel the world. That’s how good budgeting is.
Budgeting is the process of allocating sums of money to different purposes. It is sitting down and deciding where your money is going to go and why.
You may sit down and do this every week, or you might do it once a month. Personally, I do mine whenever I get paid which is once a month. I will revisit it at least once a week to check that I am within budget still.
On a practical level, you are going to need either some paper and a pencil or a spreadsheet. If you want to give yourself a head start on this you can download either a printable budget or the spreadsheet I use from my shop.
Once you are armed with these you will need the following information:
Literally, everything that hits your bank account counts as income. This can be from your job, side hustles, benefits, interest on savings or anything else you can think of.
When it comes to your budget, it is best to include it all and give that money something to do. I’ve had one-off payments come in before and because I didn’t really know what to do with them they just sort of disappeared.
By including all income in your budget you’ll look after it carefully and it won’t just magically vanish without achieving anything.
These are the outgoings that you have little control over the amount they cost. They typically include items such as your rent/mortgage payment, council tax, gas, electricity and others.
Normally, people would consider the items in this category as being completely fixed. As in, they have no control over the amount. Personally, I don’t like to think like that. My philosophy is that I can get everything for less.
Typically, these are called variable expenses. They will change from month to month (or week to week) and you will have to determine what gets spent on each of these.
Items that normally fall in this category include food, entertainment, day trips and eating out. There can be so many things that need to be considered in the budget that will vary each time you do it.
The best way to tackle this category is to look back over past expenditure. Take out your bank statements from the last three months and categorise everything you’ve spent.
It is normal to be totally shocked at the totals but this is where your budget will set you free. Seeing those figures and working to reduce them will free up the space to do the things you love.
A top tip for this category is to take a look at your expenditure from the same period last year. This will help particularly you have a lot of family birthdays in that month that you’ve forgotten about, or if your car needs an MOT.
First up you need to allocate your money to those things that are fixed. Your mortgage provider isn’t going to be too happy if you prioritise a two week holiday in Spain over paying them.
Secondly, and this might be controversial but, you should look at your money goals. What do you want to achieve in the next 6 months? A year? Five years? Work out how much money you’ll need to save or invest for those things and get that in the budget.
The reason we give these things this sort of lofty priority in the budget is that they matter. These are the steps you need to take to live the life you want. They need to be high up. Some people stand by the “pay yourself first” mentality and give the highest priority. They matter. Treat them as such.
Next comes the process of sorting through your variable expenses. Use your past expenditure to set a reasonable figure for this. If you were spending too much on this before, reduce it a bit and set yourself a realistic target.
If you are using my spreadsheet, it will calculate the totals for you and you’ll be able to see what you’ve got left in your budget as you go. Tweak things as necessary until every penny is accounted for.
This happens. You might have to cut back on something else or dip into your emergency fund this month. But make sure you do something about it next month.
You might decide to set up a sinking fund if it is car repairs or a household bill. This is where you budget for a fraction of this cost each month so that when it happens you are ready.
Alternatively, you might need to budget something in to cover these extra costs. You might need to rebuild your emergency fund for example.
You learn. Don’t beat yourself up about it. You need to learn from what happened and act to stop it from happening again.
Most people struggle with a budget when they try to reduce their spending in one category by too much. Attempting to half your food bill in one month is setting yourself up to fail. Try instead to achieve this in smaller steps.
Share your budget with others in your household or anybody that it will impact. You need everyone to be on board otherwise you’ll be fighting against them.
It also helps if you talk about it with friends and family too. Tell them about your budget and what is going well and not so well. You never know they might have some great advice to help you.
These are brilliant. They are real envelopes that are labelled according to each area of your budget. Once you know what you what to spend you withdraw that amount in cash and place it in each envelope.
Once you’ve spent all the money from that envelope it is gone. It is a more visual and physically form of budgeting and it really helps you to connect with your spending.
You can find my printable set of cash envelopes in my shop.
There are SO many great apps out there now to help you budget. Honestly, it is foolish to not use them in my opinion. They are genuinely helpful.
For analysing your spending and generally keeping you on the straight and narrow Cleo is great. It works from Facebook Messenger and you send message to and fro about your money.
You will connect your bank accounts to it (don’t worry, it is safe) and it will tell you how much you have spent on different categories. Information is key here. It will help you understand your habits.
There are also some really great app only banks around now. My favourite being Monzo whose app is such a great help when it comes to budgeting and saving. You can see how much you have spent in each category and set up saving pots to help you meet those big money goals.
All you need to do is start. You can’t be a budgeting pro without a budget so go and do one. Remember that I have some already set up for you so you can jump right in.
Remember that this budget will open doors for you. It will give you back control over your money and your life. You really can budget yourself free.
Disclaimer: Remember the information you read here does not represent advice. Any ideas or suggestions are just that and may not work for you. Read the full disclaimer here.
Looking After Your Pennies is an eco-friendly personal finance blog written and managed by Charlotte Jessop.
I write on a variety of topics including frugal lifestyle, eco-friendly living, money making ideas and generally how to make your money go further.
Get all the eco-friendly personal finance tips straight to your inbox.
You have successfully joined our subscriber list.