How To Plan A Budget
Posted 26/04/2016 by BrightHouse Team
Planning a budget for your home can help you keep control of your money, and help you to reach savings goals. It’s also a great way to see where you’re going wrong if you find you keep overspending.
A budget is simply a way of seeing your income and outgoings all in one place, so you can see the difference between them and what you spend the most money on.
We’ve also created a ready-made budget planner for you to use, making it that much easier to get started, in which you can download here.
How to make a budget
1. You’ll need to start by gathering some information.
- A couple of months’ worth of bank statements.
- Details of your income, such as a pay slip
- Details of any regular household bills
- Details of any other regular bills or payments
2. Add up your income so you know exactly how much you get in each month. If your pay is slightly different each month, just make an estimate based on what you usually get. Make sure to use the amount you are left with after you’ve paid tax and National Insurance – your payslip will show this figure.
3. Work out how much you spend. This takes a bit more time, but it’s important to get it right so you can build a realistic picture of your spending.
- Create spending categories such as ‘utilities’, ‘household’, ‘groceries’ etc.
- Enter individual bills and costs under these such as ‘water’ and ‘car insurance’.
- Estimate how much you spend on other things based on your bank statements
4. Compare your income and outgoings. This will give you the overall balance of your finances, and whether you spend more or less than you earn. Take away your total spending from your income, and you’ll get the difference.
If you end up with a negative number, you definitely need to make a budget to help better organise your spending. Even if the number is positive, creating a budget is a good idea to help make the most of your money.
5. Create a realistic budget. Set a budget for each area of spending you identified earlier. Don’t be overly strict with your limits though, as you’re likely to end up breaking them and feeling like you’ve failed already. Set realistic amounts to spend each month.
Plan ahead for big payments such as Christmas and holidays. Look for places where you might be spending more than you should and think of ways you can cut back. Keep a close eye on your budget for the first couple of months to see how well it’s working. If you find your spending estimates aren’t realistic, tweak them a little to reflect what you actually spend.
6. Make savings goals. Now you’ll be able to see where you can save money in order to save up for holidays or Christmas.
Set aside an amount to save each month and you’ll soon reach your savings goals if you stick to it.
Feel free to download our free budget planner to help you with your monthly and annual finances.