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There are loads of different ways to create a budget, because there are loads of different ways to earn and spend income. Some people have joint accounts; others don’t have a fixed income; so there are loads of different ways to plan your finances.

However, we’ve scoured the Internet, and pooled our own experiences and expertise, to come up with some key budget considerations that we think will work for everyone.

We’ve even included a screenshot at the end of the piece that shows you my actual monthly budget planner and what I’ve built that works for me.

1. Figure out your overheads

There are loads of different ways to plan a budget. Some people say start with what you earn and work from that, but that doesn’t always work for those of us not on fixed incomes. That’s why we recommend you figure out your monthly expenditures first.

This includes: Mortgage/rent, transport costs, Food Shopping, Credit Card payment, standing orders, ALL bills (including internet, heating, phone contracts etc.). You can break it down into as many subcategories as you like, just make sure it’s all their.
For example, I split every bill into its own category so I can see exactly what’s going on with my money.

Now, we appreciate that bills may vary month to month. What you need to do is make sure you always have enough to cover them. To do this we recommend you look over your payments of the last 12 months and see the average of what you’ve paid. Always set this amount aside each month, regardless of whether the bill comes in at less. This way you will have enough left in your account to cover a slightly larger bill, and by saving a set amount each month it actually makes your budget easier to calculate.

2. Do the math

Once you have all your overheads costed and set, then add them all up. See exactly how much money you need to live. Once you have this figure subtract it from how much money you earn a month. It will let you know exactly how much ‘wriggle room’ you have.

For example, once you know your base costs, you can apportion yourself a ‘fun’ budget, for money you can use to socialise etc., or you can apportion yourself a ‘savings’ budget, with an amount of money that you can put towards savings. For those of us not on fixed incomes, these two categories will probably fluctuate on a monthly basis depending on what we earn that month.

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3. Look at your past spending habits to help you

Whilst some categories, such as ‘mortgage’ or ‘car payments’ are 100% set in stone, setting others, like ‘food shopping’, or ‘fun’, can be trickier. It can be difficult to arbitrarily pluck a number out of the air to work with. That’s why we recommend you take a bit of time and sit down with your previous 5 or 6 bank statements to really get a true idea of what you spend in these areas.

4. Be realistic

If you only set yourself 50 a month for ‘fun’, then it’s not likely that you’re going to be able to stick to your budget. Not only will this mean that you could potentially go into your overdraft and incur bank fees (although check out our post on how to avoid some of these fees), but the more you break your budget the less likely you are to stick to it in the long term. It’s a psychological thing; if you tell yourself it’s not working, then it won’t work. So, we recommend being honest with yourself from the start and set yourself a budget that you know you can stick to.

5. Set savings goals

Set yourself a few short term, manageable goals. Don’t think any further ahead than about 1 year (18 months at the MOST). We’re thinking a holiday, or maybe something new for the house, anything that motivates you to keep putting away the pennies basically. This makes it so much easier to actually stick to plan. If the goal is too far in the future it doesn’t feel real so you don’t keep your discipline, whereas if it’s in the near future it’s easier to keep yourself motivated. Trust us, give it a try.

6. Get something to help you record all this

Record your budget and your spending somewhere, either in an app or a spreadsheet. Whatever works for you, just make sure it’s something you can have constant access to so you can keep it updated. The key thing to remember about a budget, is that it is a constantly adapting tool. If something happens that means you need to transfer some cash from ‘food money’ to ‘heating bill’ one month, then do it! Just record that you’ve done it so you can look back and see the alterations and patterns of spending. By doing this you will be able to refine your budget over time, to the point that it works for you 100%.

As promised, below is the screenshot of my own budget that I use on a monthly basis (with a few dummy costs in it). I tally up all my monthly expenditure and how much I will need to cover them at the beginning of each month. Then, as the month goes by and I start spending, I add each spend into the ‘running tally’ column. This way, when I reach the limit I know I need to stop.

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Let’s start the New Year Right!


Start your savings journey in 2018 with Oval Money!

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