Claims hotline

Five steps to smart budgeting

Jun 16, 2020.

In a world that endlessly tempts us with ads for new smartphones, exotic holidays and clothing sales, it can be easy to overspend without a personal budget. So whether you’re starting university, getting married or just taking control of your finances, here are our five steps to building a budget that makes the most of your money, so you can make the most of life.

1. Understand your monthly spending

You can’t plan a journey unless you know where you’re starting. So first, make a list of all your expenditures – every bill, concert ticket and takeaway coffee – and note how much you’re spending on each of those things every month.



2. Prioritise needs

There are lots of ways of deciding which of your spending is absolutely necessary and which you could live without, but we recommend these three categories:

  • Needs: Things you require to live or unavoidable bills. Food, rent/mortgage, loan payments, pension provision, that kind of thing. (Be realistic – you need to eat, but not at fancy restaurants!)
  • Wants: Things that improve your life, but you don’t absolutely need
  • Likes: Things you enjoy, but could easily sacrifice


And be honest with yourself – is that thing really a Need, or is it just a Want?



3. Pay and plan your future self

If you have debts, decide what you can afford to pay off each month – the more, the better. If you don’t, decide what you want to save each month, and make it easy with an automatic regular payment. Your future self will thank you. Also don't forget to plan your budget with a long-term perspective: you will enjoy a worry-free life after retirement if you make financial provisions in the decades beforehand.



4. Plan

Compare the rest of your monthly income with your Needs, Wants and Likes. If it won’t cover everything, decide what to sacrifice from the easiest category first – your Likes. Then, if you have to, move on to the Wants list – this should only be necessary if you’re in debt or have a long list. When money worries are a thing of the past, you’ll be glad you did this.



5. Simplify with smart budgeting apps

You shouldn’t have to constantly think about your budget. Instead, automate things with an app. Mint, You Need a Budget, and Goodbudget are all great free options.


Happy budgeting!


Find out how to make your money go further with our budgeting tips and savings advice.