There comes this moment in most people’s lives where they get a job and start earning a salary. It can feel exciting and daunting all in one.
Probably one of the best parts of starting a job is receiving your first pay cheque. After all it makes all your hard work worth it! So it’s time you learned how to budget that money to meet your demands and make your financial dreams a reality.
My top tips for budgeting your monthly income:
1. Budget for less
This might sound counter-intuitive, however I tend to budget for less than I am actually paid. So, let’s say I earn £2000 I would actually budget for £1700 as this allows me a buffer.
A buffer zone can be used for ‘just in case’ scenarios. Just in case your car breaks down or just in case you need some extra retail therapy.
Even with budgeting there is always something unexpected that you will have to pay out for.
And even if there isn’t anything extra to pay out for one month, you feel like you have extra cash to play with. Which is always a nice feeling.
2. You’re allowed to break your budget
Remember you don’t need to feel guilty if your break away from your budget. Sometimes after spending all that time planning you feel like you MUST stick to it.
There’s no budgeting police, thankfully, otherwise I would have been in jail a long time ago.
If you find yourself constantly overspending and changing your budget then maybe it’s time to change it. It’s ok to factor in money towards yourself in your budget. In fact, putting money aside each month for retail therapy or treating yourself can actually make it easier to stick to the budget. Budgeting isn’t all about bills and savings.
3. Keep it updated
Once you’ve taken the time to set up your budget, the second most important step is to update it regularly. That doesn’t necessarily mean you need to be updating your budget every day.
I tend to update my budget at the end of each month. It usually takes no more than 30 minutes on a weekend to cross check what I’ve spent on my mobile banking app against my budget forecast.
Actually keeping a close eye on what you spend is really important. You don’t want to get into bad habits and have debts. Only spend what you can afford. There is a reason why financial advisors suggest cash only, you can see the money leave your hands.
4. Make it practical for you
In order to regularly update your budget it needs to be accessible. Everyone will prefer their budget in a different format, for instance I prefer mine as a spreadsheet.
Either get creative and make your own or access the many different templates available online. I personally like the MoneyHelper planner as it’s so straight forward to use (ideal for those who want something super easy or for beginners).
Your bank might even offer budgeting help! Some banks will send text alerts when your bank balance drops below a certain amount. It makes budgeting even more convenient for those who are always on the go.
5. Start by making a list
For those thinking, ahh how do I start this off! Don’t panic, the simplest way to start is by making a list.
I started my list, firstly with a cup of tea, and then opened my past 2/3 bank statements. Looking back over 2/3 bank statements gives you a better understanding on what you consistently spend money on.
I grouped all of my expenditure into categories and ended up with something like this:
- Mortgage/ rent
- Utility/ bills
- Groceries
- Car/ petrol
- Credit card
- Work related/ business
- Clothes and beauty
- Memberships (gym)
- Day trips/ meals out
- Holidays
- Savings
- Investments
Yours might also include things like childcare or pet related costs. Either way these categories will form the backbone of your budget.
I prefer doing this than just relying on the categories that templates suggest. That is because we all spend money on different things and it should be relevant for you.
Once you have your categories, all you need is your total monthly income and that’s it! You can start your budget!
6. Savings and Investments
The biggest reason I started budgeting was for savings and investments. I guess most of us have financial dreams, right? Whether that’s big or small. My main goal is to buy the dream house..
By starting a budget you can incorporate savings/ investments and ultimately work on reaching your financial dreams.
We all have necessities, things like bills and food. But setting a budget on other things like meals out or retail therapy can re divert money to savings without you overspending.
How much should I save?
You might have heard of the 50-30-20 budgeting rule..
50% spent on necessities ( bills, rent, food, transport..)
30% spent on wants (clothes, memberships, days out)
20% spent on savings
How realistic it is to follow this rule will depend on your income. However using this rule is a good place to start. The most important thing is that all your necessities are covered. If they aren’t then focus on adjusting that 50%.
And finally..
So there you have my top 6 budgeting tips. I received my first pay slip in December 2018 and wow it was the best feeling. I didn’t actually start budgeting until 2021 and it has revolutionised my spending habits. Honestly if I can do it I know you can too.
Thank you for taking the time to read through my post and would love if you checked out my other posts below. You can find me on Pinterest (and soon to be on Instagram).
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