If you ever feel like you are losing control of your spending and you want to know how to budget, we have some good news. It could be a lot less complicated than you think to put together a monthly budget.

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Essentially, all you need is an hour of your time and access to your online banking or banking apps. How much money did you spend on food last month? What about entertainment? For that matter, how much income did you have last month, and how much did you spend in total? How much did you put away for savings?

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Now what is your goal? If you’re concerned about how to save money fast then you might need to cut down on some non-essential spending. We’ll go into that more later.

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‍In this blog, we’ll cover how to budget money, how to plan saving and spending, where to find a good budgeting template, and how to improve your budgeting skills.

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What is the purpose of a monthly budget planner?

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We all know what a monthly budget is: essentially, it’s a plan to keep track of your income and your spending, so you can make sure they’re aligned (and hopefully save money). Obviously a budget is important to stay out of debt and save for emergencies and the future, but that’s selling it a bit short. Because you might not necessarily need to keep track of your spending to stay out of debt and even save. You might be able to just ‘wing it’.

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‍But when you actually take the time to keep a monthly budget, and follow it, it changes the way you look and think about money. You become aware of habits you didn’t realise you had. You prepare better for rainy days and - even if it’s years away - retirement. You’ll never miss paying a bill on time, and you feel more in control of your spending and saving.‍

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There are countless benefits, and many of them are profound.

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Free monthly budgeting spreadsheets

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Personal finance experts have shared loads of free budgeting spreadsheets online. Two of our favourites come courtesy of MoneySavingExpert, which gives you a downloadable spreadsheet, and MoneyHelper, which you complete online.

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They give you a step-by-step guide and tell you how to interpret the results so you have a monthly budget plan that you’ll be able to stick to.

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How to budget money?

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The hardest part of creating a budget might be gathering the will to start. Once you do, it’s relatively easy to make a habit of it and keep it going.

Here are the basic steps in creating a budget:

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1. Calculate your monthly income.

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‍This should be the actual amount of money that goes into your bank account — so your salary or pension after taxes. You should also include any benefits you receive.‍

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If you’re self-employed or a freelancer, this may not be a consistent number, so use a conservative estimate (check out our article on how to budget as a freelancer). Alternatively, you might want to start by adding up some basic necessities, like rent, loan payments, and food. That way, you at least have a consistent target, and when you plug in your take-home pay as it comes in, you’ll have a fair idea of where you stand.

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2. Calculate your expenses.

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‍This includes your essentials, like rent, food, any loan and credit card repayments, insurance. But you should also include your wants, like entertainment, travel, dinners out, fashion, and anything else you like to buy, but technically could live without.‍

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3. Create categories — including saving — and set limits.

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This is the crucial part. Divide your spending into different categories, and set limits on each one for how much you can afford to spend based on your income. Ideally you should add saving money for emergencies and retirement (especially if you don’t have a pension) to that category.

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Then take a good look at your wants, and give each of them a spending limit, based on the money left over after you cover your needs.

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One more important thing: Give yourself some wiggle room. Don’t create a budget where your spending equals your take-home pay, and your available money goes down to zero. For one thing, you’re only human, and you might go over certain limits sometimes. And for another thing, life is full of surprises. Your spending is naturally going to go up and down month by month.

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4. Track your spending.

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‍In the ‘old days’, personal finance experts might have advised recording everything you buy, and entering it into some kind of spreadsheet or ledger at the end of the day. But thankfully today easy tech can come to the rescue. As you’re probably aware, your online banking and app automatically record your debit card spending. But there are even better apps for creating, and sticking to, a budget.

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‍For instance, the HyperJar app lets you divide your money into different ‘Jars’, which you can label ‘Entertainment’, ‘Dining out’, or whatever you like. You can put the amount you want to stick to in each jar, and when you spend in that category with the HyperJar debit card, you can tell the app to take the money from the right budget. You can even link jars to popular merchants, so the card automatically takes from the right jar.

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The app also tells you how much you’re spending per Jar, category, and merchant, which makes budgeting even easier.

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5. Adjust your spending over time.

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After two or three months, these habits become easier. You should get a pretty good idea of where you’re spending the right amount, where you should spend less, and even where you can spend a little more. You can then adjust the amounts, because now they won’t just be estimates. Then it’s up to you to stay within the limits, and grow your savings.

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And if you end up having trouble sticking to your budget, you can always reach out for help. There are countless sites that give free, helpful financial advice, like MoneySavingExpert and MoneyHelper, and independent financial advisors and counsellors that will meet you personally. You might ask your bank for a recommendation, and of course there’s always Google.

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How to stick to a monthly budget?

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‍You might be thinking ‘All of this is easier said than done.’ But really, like any skill, once you start doing it, it will become easier and easier. The trick is just to start.

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And there are also effective methods that make it easier, like automating your savings, practising paying yourself first, getting an accountability partner, cutting your unnecessary subscriptions, and practising mindful spending. 

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We detail a lot of great methods in our post 10 Realistic Methods To Stop Spending and Start Saving Money in 2022.

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‍Common budgeting mistakes and how to avoid them

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‍Here are some common mistakes people make when budgeting, and how you can avoid them.

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1. You don’t know where your money is going.

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‍If you set a budget, but you don’t track your spending, you’ll still be in the dark and it will be hard to stick to limits. But this is not something you need to labour over! To make it super-easy to track your spending, you can use an app like HyperJar, which will show a breakdown of your purchases according to category, merchant, and Jar.

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‍2. You don’t set aside money for saving, and give yourself wiggle room.

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‍Remember, a budget is not just for making sure that your expenses don’t exceed your income. An important part of it is making sure you’re also setting money aside for rainy days and the future, and also that you’re giving yourself a little leeway as well. If you don’t build those things into your budget just as you would your other expenses, you won’t save anything, and you might even find yourself underwater.

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3. You don’t review your budget regularly.

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‍Unfortunately, budgets don’t fall under the category of ‘Set it and forget it’. You have to regularly review your budgets and adjust it according to your spending habits (not to mention adjusting your habits according to your budget!). You don’t have to do this every day, but every month would be sensible.

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4. You’re too hard on yourself.

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‍If you find it hard to stick to a budget at first, don’t beat yourself up. It takes time to change habits, but they will change eventually. If you’re too hard on yourself, failure might become a self-fulfilling prophecy. Any single step you take in the right direction is a step towards a healthier financial life. Those steps add up, and in the long run, you’ll make more progress than you ever thought possible.

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How HyperJar can help with your monthly budget

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If you’re visually-minded and you like to see where your money is going, HyperJar makes it easy for you to create jars for all of your essential expenses. If you put money into these jars once you’ve been paid, you know how much you have left to save or to play with for the next week or month - however you prefer to plan your spending and saving.

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HyperJar can also help your money go further. You can buy Cashback Vouchers in the app for grocery shopping, clothes or travel, where cashback rates are up to 15%. At certain retailers, every £100 of vouchers you buy will get you £15 of cash that you can save or put back into a different part of your budget.

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