How To Plan Your Personal Budget

When you initially think about a personal budget it isn’t all about stripping away all the fun things. We all need to factor in things which make us happy into our budgets, otherwise, we’ll feel deprived. Of course, if you’re happy to cut it all out then good on you, you’re a stronger person than me. I still need to know I’ve got enough spare cash to buy dinner out or a new top if I want to.

Taking some time out to plan your personal budget can take some time in the beginning. But it’s well worth it in the long run. I’ve been in situations where I look at my account and I wonder where all my money has run off to. That’s why it’s important to stop and think about it. We want our money to work harder and smarter.

Planning your personal budget Part 1 – Note down your regular expenses

One of the first things you need to do when planning your budget is to think about your regular expenses. Note down everything that you pay out every single month such as rent/ mortgage, home bills, phone/ internet bills, subscriptions, gym memberships etc.

During this period you’ll probably be surprised at how much of your income is pre-defined as to where it goes. For a lot of these expenses, they’re non-negotiable. You need a roof over your head so rent or mortgage and bills can’t really be avoided. But during this phase think about the monthly payments you make where you may be able to reduce them. Do you need both Netflix and Now TV? Do you need to pay for the top level of gym membership when you just go to a spin class twice a week?

This might take some time but honing exactly what regular expenses you have and need are so important.

Planning your budget Part 2- Note down your spending habits

You’ll need to do this for a whole month but set up a spreadsheet and note down every single thing you spend. That £3 on a coffee when you’re running late to work. That £5 you spent in Tesco grabbing dinner, everything.

Over the month you might start to see patterns. For example, do you always buy lunch out at the end of the week as you’ve run out of shopping at home? Do you always buy coffee on the mornings that you overslept etc? Thinking about every single penny of your money will help define what you’re happy to spend money on and what you don’t like spending on.

It’s also worth thinking whether your spending was planned. Did you go out for the evening and factor in knowing you were going to go out for dinner? Or were things more spontaneous? While it’s always fun to do things on the spare of the moment this can be when you spend money you hadn’t planned on.

Budget planning Part 3- Start your plan

I’m going to talk about the start of the month. But your start of the month will be just before you get paid so could be mid-month/ end of the month etc. So at the start of the month create a spreadsheet and add in your regular expenses. Alongside this you can put the date the expense comes out of your account. I am very much an advocate of separating out accounts for direct debits. So in an ideal world, you’d have a separate account knowing that say £800 was needed for your direct debits. Then at the start of the month, you transfer £800 to this account and you know what you’re left with is yours.

Once you have your plan with regular expenses factor in other things which may come out such as savings. Then it’s time to look at your calendar for the month ahead and factor in your plans. Try and assign a monetary value to each activity so if you know you’re heading out for dinner one night, you might know that travel will cost £10 and you generally spend £30 on dinner so your budget for that night is £40.

Having this set out will help you factor in the things you know you have planned this month. It might also help you to really hone in on how much you spend. You might see how many times you’re going out for meals and how much you spend may scare you. So you might decide to take action and reduce your spending by £5 each time to save money.

Once you’ve made a note of what you know you’ll be spending you’ll see what you have left. This might make you think twice about buying that new top or going out for yet more drinks. You want your money to be able to last all month and not get to Week 3 unable to do anything as you’re skint.

Planning your personal budget Part 4- Implementing the plan

This might seem like the scariest part but once you get used to your plan it will seem natural. If you’re bad at just whacking things on your card then withdraw the money you have assigned to an activity and pay by cash. We all know how easy it is for 2 drinks to turn into 4 and suddenly your cheap £15 evening has turned into a money pit. I have started doing this more, and sometimes I’ll even leave my cards at home so I can’t be tempted. You need to do what works for you.

During the month continue to keep an eye on what you spend like you did, to begin with. This will help you see whether your estimations of how much things would cost are realistic. And it will also help you see your unplanned spending so you can look into this more. You might find that each month your budget needs to change depending on your plans.

Finalizing your personal budget Part 5- Fine-tuning

This will be very similar to part 2 and a bit of an ongoing task but massively worthwhile. As you’re spending, or even when you review at the end of each month, you may be able to make more changes to your budgets. For example, you might find you actually end up with some money at the end of every month which you then waste on shopping you don’t need. So this could mean you put a bit of extra money into your savings at the start of the month. You know the money is always spare and it will stop you from making impulse purchases.

These savings are something you wouldn’t usually have and even an extra £30-50 a month adds up over the year.

Do you plan your monthly budget? Or do you think you will now?

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