How to Create a Budget
While a budget isn’t a magical solution that will allow you to successfully manage your finances, it can mean more financial freedom, not to mention less stress. You simply need to consider whether you are spending within your means, and if not, what you can afford to spend each month.
There are plenty of free online budgets you can complete, such as The Money Advice Service’s budget planner. This can be helpful as a starting point, but how do you improve your budget, and then start saving?
When creating a budget, you first need to consider your income and expenses. It’s important to be as accurate as possible with all your figures, otherwise it’s less likely that your budget will be successful moving forward. Generally, the best way to do this is to go through your bank statements for the last few months, and put your spending into categories.
You should separate priority expenses, such as your housing costs, bills and utilities, along with grocery shopping, from any unnecessary expenses that tend to crop up, like eating out and buying luxury items. You won’t need to cut such expenses out entirely, but it’s important to distinguish between priority and nonpriority expenditure – what you need and what you want.
Once you’ve grouped your expenses into categories, you can start thinking about where you can cut back on costs, and be more mindful of where your money goes.
● When creating a budget, a good place to start is going through your bank statements and categorising your costs
● Once you know how much you’re spending each month, and in what areas, you can create an action plan
● Your budgeting plan can be as strict as you want it to be – this will depend on your personal circumstances, such as how much disposable income you have, and whether you have a lot of outstanding debt
● There are a number of apps and technological tools that can help you budget better, often without having to think about it
There are innumerable types of budgeting plans. For those struggling with their finances, there are incredibly rigid plans that monitor just about every penny, but most plans are fairly relaxed. They simply get you to think more about what you’re spending, and encourage you to do less impulsive buying.
One of the more popular budgeting strategies is the 50/30/20 method. The idea is simple – you spend approximately 50% of your income on necessities, 30% or less on nonessential costs, and 20% of your income on savings, investments, and repaying credit commitments. With this method, you can still indulge on occasion, but will also be thinking about your financial future. You can work to become debt free, save for your retirement, and have enough of a savings buffer to cover any unexpected expenses that may crop up.
Technology and Apps
If you don’t want to worry about budgeting too much, one of the easiest ways is to use a handy app. There are loads of budgeting apps on the market, some of which come with a small monthly fee. We’ve listed three of the most popular apps below, all of which are completely free!
As you might expect from the name, this app lets you see all of your accounts in the same place. Your expenditure is categorised for you, so that you can easily track your spending. You can then set targets for each category, so that you can save money in particular areas rather than cutting back across the board. This is a particularly useful feature for those who overspend in one area, such as fast food or daily coffees.
Oval allows you to set up certain rules for saving, based on your everyday habits. For instance, you could create a rule that moves money into your savings account each time you go for a run. You can also set savings missions, to encourage you to reach your budgeting goals, and to improve your saving habits in the long run.
With Yolt, you can bring all your bank accounts and financial investments together in one place. So that you can see what you’re spending, your transactions are automatically split into different categories. You can also track your purchases through spending history charts, and see upcoming payments to avoid nasty surprises. Yolt additionally allows you to set and track spending limits for each of the categories listed.
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