The Beginner’s Guide to Monthly Budgeting

In the wake of a new government, the future of personal finance is uncertain. The Prime Minister warns that “things will get worse before they get better”, but that doesn’t mean you have to struggle. With proper planning and forethought, you can prepare a monthly budget that keeps you comfortable, and keeps you saving.

At Hansford Bell, we have decades of experience in supplying finance and budgeting support for a huge variety of clients at all income levels. In this article we’ll introduce you to methods for planning a monthly budget, creating a budgeting spreadsheet, and offer insight into how to budget and save via different budgeting plans!

How do you plan a monthly budget?

The first step to creating your monthly budget plan is to look at your current expenditure. Figuring out where your money is going can be quite difficult, especially given the nature of online subscription services – of which there seem a never-ending supply.

Take inventory of what’s going out and in. Check bank statements, direct debits, and standing orders to check what current payments you have set up. If you have other accounts, such as PayPal or Google Play, it is also worth checking them as sometimes subscriptions can be nested within.

Once you’ve taken stock of all your repeat expenses, including things like utilities, vehicles bills, and rent or mortgage, you should have an overview of how much money you’re spending each month. Then, you can compare this value with your net income (after tax) to determine what your budget could look like.

One note of import is on how you split up your budget. Needs, wants, and savings are the primary categories for how you sort your money. Things like subscription services tend to fall within the “wants” category, so keep this in mind when you’re adding up the totals – consider collating services like Netflix or Amazon Prime separately to your crucial expenses like electricity and water.

Now you know how to see what your current budget looks like, you’re better positioned to make a budget plan that helps you achieve your goals. You will need an idea of how much you should save, how much to spend on necessities like food and bills, and how much will be left over for you to enjoy. To help, you can make use of a spreadsheet that can speed up or automate the process.

Find out how much you should have in your savings >

Making a monthly budget spreadsheet

Whether you’re using Excel or a free tool like Google Drive, making a monthly budget spreadsheet is much the same. To begin, you will need information including:

• Your net monthly income
• An itemised breakdown of your necessary outgoings (e.g. rent, utilities, broadband, petrol, food)
• An itemised breakdown of your optional outgoings (e.g. subscription services)
• Your savings goals (percentage or flat)

Once you have these values, you can begin making your spreadsheet. Here are some steps to take, and things to consider along the way:

1. First, split your budget out according to your savings and lifestyle goals. If you’re using a 50/30/20 plan (more on that later), assign 50% of your budget to necessary expenses, 30% to a personal fund, and 20% to savings.
2. Add the values for each item to a list under each category.
3. Subtract the sum of these values from the total allocated budget.
4. You should now be left with an overview of your expenses. Any leftover money in the necessary expenses column can be used to pay for things that don’t have a fixed value each month, such as fuel or food. Anything left over beyond that can be allocated to your personal fund or savings as you please!
5. If your savings or personal fund aren’t at the levels you want, consider changing the budget so it’s divided more evenly according to your needs. The good part about making a spreadsheet is you have full control over it!
6. Finally, if you’re already over budget, consider where you can cut back on your spending. While necessary expenses can be hard to overcome, things like subscription services can really eat into your pocket, and add up quickly. Cancelling these may not solve all your problems, but it can prove a good step towards obtaining a balanced monthly budget.

How to budget and save

Now that you know how to plan your budget, it’s good to look at some ways you can cut back on spending so you can save more money.

When reviewing your budget plan, take a look at areas where you might be overspending. Regular monthly subscriptions like the gym, streaming services, or Amazon Prime can all contribute to a strained budget, so try and cancel the ones you don’t use as much.

Particularly with things like gym memberships, there may be more cost-effective options such as bulk payments or pay-as-you-go, which could be cheaper overall if you don’t access the facilities overly frequently.

Other budgeting tips could include:

• Setting up direct debits for utilities; overspending in summer months to create a buffer for winter months, resulting in more balanced overall budgeting.
• Buying cheaper food where possible. Store-brand items are often high quality, and occasionally are even ‘white-labelled’ versions of premium products!
• Cut back on dining out and takeaways – the price of convenience can be too much for a tight budget to bear.

Having an overview of your finances can also help with budgeting and saving. If you’re investing your money, you could see a return down the line, making the most of the money you put aside and working towards a more relaxed budget.

Learn more with our beginner’s guide to investments >

Types of budget plan

There is no right solution when it comes to a budget plan. In fact, there are many different categories to choose from to determine how you save and spend your money. Here are some of the most popular options:

50/30/20. As we mentioned earlier, this is a popular budget plan both due to its simplicity and its effectiveness. It involves setting aside 50% of your income for necessary expenses, 30% for personal use, and 20% for savings. With this plan, you can steadily build up your funds while still enjoying your daily life and having enough set aside to cover your bills.

Envelope. Although traditionally using envelopes and cash, this budgeting system can be modernised with tools like online banking or savings apps. Similar to 50/30/20, the envelope system involves assigning money to different pools such as rent, fuel, and food. You put aside the amount of money you expect to spend on each item each month, and any leftovers are yours to use or save as you please.

Reverse. Also known as ‘pay-yourself-first budgeting’, reverse budgeting means to focus on your savings goals before anything else. Depending on the magnitude of your savings goals, you may need to make lifestyle changes should the amount you’re trying to save cut into your necessary expenses or personal fund.

Zero-Based. Similar to envelope, this involves assigning your money to different things each month. However, where it differs is that zero-based plans aim to make the remaining sum of your money £0, requiring in-depth prediction of your expenditure. You can set the categories as you wish, and they can include things like savings or personal funds, but in essence this system aims to prevent impulse purchases and ensure you have enough money set aside for all your needs.

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