5 steps to budget your money correctly

1 – review your spending

This will help you work out your typical expenditure for the month. It can be shocking to see how much money you spend on certain things without realising it. Put everything into categories and identify any areas you could easily cut back on. Areas such as eating out, tv subscriptions, and clothes.

Look into your mortgage interest rate, energy provider, internet provider, and insurance premium. If you aren’t getting a competitive rate, switch to a competitor for a cheaper deal.

2 – Choose a plan that suits you

Creating a realistic budget plan that you can stick to month after month is the key to long-term saving. There is no point in creating an unrealistic budget that will make your life miserable and eventually give up on. I find the ‘jam jar’ approach works well. You split your money into categories and assign a certain amount of money each month to that category depending on your current spending habits. When you spend the money in a category you now cannot spend any more money in there until next month.

A good budget to start from is the 50/30/20 method used by millions around the world.

3 – Track your progress

You should review your budget every month to see how well you’ve done. Set realistic savings targets each month to help you stay motivated to save. Some months may be higher than others due to unexpected costs. As long as most of the time you are within your budget and are meeting your savings target then you should be happy.

4 – Review and alter your budget when needed

Over time your commitments, priorities and income change so it’s important to alter your budget accordingly to what’s going on in your life. As long as you have a budget then you are doing better than 75% of people. Budgets shouldn’t be super strict, from time to time as you need to have fun, whether that’s travelling, a new car or a home renovation. Don’t feel bad if it doesn’t always go to plan!

5 – Set up standing orders/ direct debits for committed spending

Making sure bills are paid on time is the first step to being financially free, these can automatically be added to your budget allowing you to focus on the rest of your budget.

Setting up a standing order for when you get paid into your savings account can massively help you not overspend. If you have an account purely for savings, you can trick yourself into not spending the money by pretending it’s not there.