How to budget

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  • Sticking to a budget is the key to managing your finances, but it can sometimes seem like an overwhelming task. Here, we’ve teamed up with Jasmine Birtles, founder of, to help you keep your budget simple!

    Why should I budget?

    Budgeting is the foundation for money management. Once you know what you’ve got coming in and going out then you can work out for yourself what money you’ve got to play with and what extra money you need to earn to have a fun life and spend on things that you really want.

    How do I put together a budget?

    Whether you chose to use an online budget calculator, an excel spreadsheet or just get a bit of paper and write it down, it doesn’t matter.

    Step 1: In one column, write down all the income you have – including jobs and benefits and add these up.
    Step 2: In another column, write all the things you have to spend on – including bills, mortgage and food shopping. The more detailed you are the better, but don’t let that put you off. Even if you just have a rough idea of what’s going in and coming out, that’ll give you a ball park figure.
    Step 3: Take away what you spend from your income. What you’ve got left is your money to play with – but you should think about savings and investments too.

    How much should I be saving and investing?

    Having money left over to save might seem like a luxury, but it really is worth doing to protect yourself if something unexpected happens, like you lose your job or your car breaks down and is expensive to repair.

    In an ideal world, you should have 3 times your monthly outgoings set aside in a savings account, so if it costs you £1,000 a month to pay your mortgage, food and travel and so on, then you’d have £3,000 set aside.

    And although retirement might seem like a long way off at the moment, you should also set up a standing order to go regularly either into a pension or something else that’s for your retirement (such as a Stocks and Shares ISA).

    Set these up for just after when you get paid and say to yourself, ‘I’m going to pay myself first.’

    How do I deal with big expenses like holidays and Christmas within a budget?

    Again, it’s not a bad idea to set up another savings account. You could even have a separate one for holiday and for Christmas and transfer money into them every month.

    Alternatively, you could do something like collecting all your £2 coins in a jar and having that as your Christmas or holiday money. It doesn’t matter how you do it, just whatever works for you for short term savings.

    How often should I re-visit my budget?

    Only around once a year, unless your circumstances are changing (such as you’ve got a new job or you’re having a baby).

    What if I can’t work out where my money goes?

    It’s a good idea to do a spending diary for about a month and write down everything you spend. It’s a great way to see where you’re wasting money – maybe you’ll find you’re over spending on snacks, or cups of tea or takeaways. Do it on an Excel Spreadsheet or just on a piece of paper if you prefer. If the idea of doing it for a month is too daunting, just a week or 2 is better than nothing!

    It’s actually not a bad idea to do one of these every 2 or 3 years anyway, just to help you keep track of your spending.

    I know what my budget is, but I just can’t stick to it. Help!

    Firstly, cut up your credit cards. And don’t even use your debit cards, just use cash. When you know how much you can spend each week, take that money out in cash at the beginning of the week and just spend that. It really focuses your mind to see the cash going out of your hand.

    Where to next?

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