4 steps to making a budget
No one likes budgeting. It takes all the fun out of spending money. But to make sure you’re not left in a financial crisis, have a read of our how-to-budget guide.Â
Step one: How many pennies do you have to your name?
By which we mean: how much money comes into your account each month?
To find out, consider your different forms of income:
- If you’re employed, whack open your pay-slip and note down how much you get after Mr Taxman has taken his bit away.
- If youâre a student, divide up your student loan into months. Write it down somewhere in big numbers â add glitter-glue and stickers if you really want.
- If you receive JSA or other benefits, keep a note of how much this is per month. Spreadsheets are your friend.
Step two: Where are the essential places your money has to go each month?
From your grand total, deduct those boring-but-essential things like shelter and food. The outgoings most of us have are:
- Bills – including mobile, internet and TV license
- Council tax
- Food â work out how much you roughly spend a week and then multiply it by four (remember some months are longer than four weeks so this can only be a rough guide).
- Travel to work/college
- Student loan/credit card repayments
Step three: Life can throw curveballs, so plan for them
When youâre budgeting, itâs always worth factoring in an extra 10% of your essential outgoings per month as life loves kicking you in the ass financially. For instance, what if your car breaks down? Or itâs your mateâs birthday? Or some technical glitch means your bank doesnât transfer your pay cheque to your account? Itâs extremely important to have this 10% cushion â otherwise you risk being suddenly catapulted into a world of debt you havenât planned.
Step four: Anything left?
This figure is your monthly budget â your âdisposable incomeâ.
Itâs this leftover money you need to keep a beady eye on, as this is where youâre likely to overestimate how much you have. Â£70 a week might seem a lot to start with, but once youâve bought a round after work on Tuesday then a magazine and coffee on Wednesday then youâre already down to Â£55 and itâs not even the weekend yet.
Sometimes it helps you get a sense of how much you have by feeling the actual cash in your hand â one tip is to take out your weekly budget at the start of the week. Youâll soon get used to how much money you really have then. Best not wander about with all of it on you though, in case you get mugged or lose it.
Waitâ¦ can someone else do the maths for me?
Yes. There are lots of online tools that help you break down your spending. Here are some budget calculators weâd recommend: