How to plan and stick to a budget

Reasons to make a budget

• Here are three key benefits of getting your financial ducks in a row:
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• You can avoid late payment fees by keeping on top of your bills and credit cards. By knowing when payments are coming in and going out of your account, you’ll be less likely to miss bills and card repayments, so won’t have to worry as much about late or missed payment fees.
• Your credit rating could benefit. Keeping up with payments is a sign you’re good at managing your money. This could improve your credit rating which can, in turn, make it easier to get better deals on credit cards, personal loans and mortgages. You can find out more by checking out our How can I raise my credit rating? guide.
• Helps you spot new ways to save money. Being smart with your finances in certain areas means you’ll have extra cash for things other than bills, such as topping up your savings or treating yourself to VIP seats at the cinema.

How to make a budget

Rather than feeling that the road to managing your money is one big task, try breaking it down into smaller chunks and tackling them one at a time. Here are a few tips to help.

Track your expenses

Understanding your spending patterns can be really useful when budgeting. You might already know exactly how much your rent and utility will cost, but other regular expenses can have a big impact on how much you have left over at the end of the month.

Three statements is a good number to start with. Making purchases by debit or credit card rather than in cash will create a clearer picture of how much you usually spend each month and in what areas you’re making the biggest purchases. You might be surprised how much those morning coffees are really costing you. For example, if a daily caffeine fix costs you £2.50, this adds up to around £75 per month.

Add up your outgoing expenses

You can do this by dividing what you spend into categories like ‘food’, ‘travel’, ‘bills’ and ‘entertainment’. Together, these categories will add up to your total outgoings amount.

And sticking to a budget doesn’t mean that you need to stop having fun. If you have any one-off expenses coming up such as a holiday or a new car, it could be a good idea to divide how much they’ll cost by 12, then add that number to your monthly outgoings. You can treat yourself while knowing your finances are in check by saving for that dream trip in advance.

There are lots of ways to make your money stretch further too, such as choosing matinee performances for cheaper theatre tickets, or inviting friends round your house instead of meeting in the pub – it’s all about being savvy with your cash.

Add up your income and subtract outgoings

Adding up how much money lands in your bank account every month will help you see what your take-home income is after tax. If you have more than one source of earnings, such as investments or income from property, add those to the total as well. Remember to take away anything else that’s deducted from your income, such as pension contributions and student loan repayments.

Whatever you have left after this step is your disposable income. This is money that isn’t required for outgoings and can instead be spent or saved in any way you like, depending on your plans for the future. You might want to spend this on little treats, such as eating at a fancy restaurant every now and then, or set up a savings plan for a bigger future purchase, like a deposit for a house or buying the latest laptop.

If you’re looking to the future, a savings account can be a great way to separate your money and earn interest on what you save.

Paying off a credit card or personal loan

If you can, it’s also a good idea to pay more than the minimum repayment amount, and pay off the amount in full each month whenever possible. This may leave you with less cash in your pocket in the short-term, but future-you will be grateful, as you could improve your credit score and reducing the amount you pay in interest and late fees. This could then mean you have a bit of extra cash to spend on things you really enjoy.

Budgeting tools

• The Barclays Budget Planner helps you calculate your monthly commitments, such as repayments and expenses, to work out your approximate monthly disposable income.
• Set up free email or text alerts to keep track of your money while on the move. These can be managed through the Barclays Online Banking app. There are several handy alerts that you can set, such as weekly balance updates and large payment notifications.
• If you’d like to get to grips with your finances, Barclays money management advice and tools can help. It’s free and offers helpful guides on how to improve your money management skills.
• If you have money on your credit card, use our Repayment Calculator to work out how much you need to pay each month to clear your balance.

Review your budget periodically

Whether you get the pay rise you always dreamed of, finish paying off that sofa you bought five years ago, or sign up to another TV subscription so you can binge-watch your favourite show, a change in your spending or income will affect the cash you have left at the end of the month. It’s therefore worth reviewing your budget every month, and every time your situation changes.

24.85%

(27.9% compound equivalent)

What's next?

Need a helping hand with budgeting? The Barclays Budget Planner will help you calculate your monthly commitments and work out how much disposable income you’ll have left. Then all you’ll need to plan is what to do with the extra cash you’ve saved.