By creating a budget you can:
Record income and expenses
Helping you to get a clear picture of your current position
Helping to identify areas to cut back and increase opportunities to save
Establish new habits
Helping you to avoid unnecessary spending and stay motivated to save
Feel in control
Giving you the peace of mind that comes with taking control of your finances
Make a note of everything you spend each day, over the course of a month. If that sounds like too much work, then go through your bank and credit card account statements to review your transactions. Include regular payments, such as your rent or mortgage, and utility bills, as well as irregular payments, like holidays, or the bills you only pay quarterly or once a year.
Record all your sources of income, after tax. If your income varies from month to month, take an average over a 3-month period.
Add up all your expenses and subtract this total from your monthly income.
If your budget indicates that your expenses are higher than your income, you might want to look at ways to reduce your spending. What might work for you? Could you:
switch insurance or utilities provider?
choose activities or days out in nature over those that cost money?
try going a whole day without spending any money? Or try a day a week?
Everyone’s circumstances are different, so there's no specific amount of money you should save each month. Your budget will help you determine what you can afford to put aside.
Some people find it helpful to follow the 50-30-20 model, where you aim to spend no more than 50% of your income on the things you need, 30% on the things you want, and 20% on building up savings or repaying debts. You can find out more about healthy financial habits here.
One of the most important things you should budget for is an emergency fund. Find out why an emergency fund is so important, and how to establish one.
Check out some of our savings accounts and see if there's one that's right for you.
And if you need more inspiration we've got even more tips on how to build up your savings.
Find a balance between when to put your money in savings and when to pay off a debt.