Having a household budget is an effective way to keep track of your spending and understand what you can afford (and what you can’t). If you can stick to your plan, a budget will help ensure you don’t spend more than you earn. On this page, you’ll find out what budget planning is, why it’s a good idea to use budget planner, how budgeting helps and ideas for how to budget your money.
What’s on this page
What is budget planning?
If you haven’t done it before, budget planning might seem like a daunting process, but there’s really not much to it. Budget planning can be as simple as making a list of your income and all your outgoings, including household bills, living expenses, travel, and so on (see our handy budget planner below). Once you know how much of your income you need to spend, you can figure out how much money you have left each month, as well as how much you could save.
Keeping track of your money with a budget planner can help you plan your longer-term finances, including planning for larger purchases. For example, you could use a budget planner to get out of debt, to save for a mortgage deposit, car, holiday, or to save for retirement.
Why do I need to budget?
1. Am I spending more than I earn?
If you don’t keep track of your finances, it’s pretty easy to spend more than you earn, and the reality is that you could be creating a difficult financial future for yourself. You know when you’re spending more than you earn when you start to dig into your savings or get into debt.
Budget planning can help you assess your financial situation and identify ways you could reduce your spending, as it gives you an accurate overview of how much, when and where you’re spending your money. Budget planners are designed to give you an accurate assessment of your finances so you can make better financial decisions for the future.
2. What can I afford to spend with the budget I have?
Once you know where you’re spending your money, you can then start to prioritise what you should do with your money and where to direct your expenses. This, of course, depends on your own financial priorities and needs.
Although a budget planner gives you the framework you need to work out your budget, the next step is to stick to it. It’s a good idea to make sure your budget is realistic and straightforward. Otherwise, it’s much more difficult to make budget planning an everyday part of your spending.
How does budgeting help?
Budget planning can help in a few different ways, including the following:
- Budgeting puts you in control of your finances, both in the short and long term.
- It allows you to prioritise what you should be spending your money on, and understand where you could be spending less.
- A good household budget helps you track where you are with finances and lets you know when you need to stop spending.
- You’ll have a solid plan that’s easy to follow and empowers you to make changes to your lifestyle and apply new financial norms.
- You’re less likely to get an unexpected (and possibly unwelcome) financial surprise, as you’ll know exactly what you’ll be spending and when.
- You’re less likely to get into debt as, if you stick to your budget planner, you’re less likely to overspend.
- You’re more likely to be able to save, so once you’ve put your budget planner together, it might be worth finding a savings account that suits your needs.
How do I budget money?
1. Get organised
Set aside some time to put together your budget planner and work out how you want to manage your money. While the best budget planners are pretty simple, and therefore easier to stick to, you will need to dedicate some time to creating it (try our easy budget planner below to get started). You’ll need to gather documents covering your income, outgoings and living expenses, such as bank statements, payslips, and household bills, so you have all the information to hand as you build your money planner.
2. Calculate your income
When you’re budget planning, income doesn’t just mean your regular earnings from employment, but also other sources of income such as savings or investments. Calculating what you earn per month from all your income streams and averaging it out will give you a rough idea of how much income you’ll have each month. Don’t forget to exclude any tax you might have to pay from your income figure. This is important as you need a clear overview of what your income is before you deduct your monthly expenses.
3. Calculate your outgoings
Your next step is to calculate your monthly outgoings. It’s a good idea to categorise your outgoings so you can keep track of where your money is going. For example, you might use categories like household bills, travel, leisure and children. Once you’ve calculated your monthly outgoings, you then need to subtract this from your monthly income.
4. Work out what your living expenses could be
The figure left over after you’ve deducted your outgoings from your income is your living expenses. Living expenses include things like the weekly household shop and your mobile phone bill. If you can, it’s beneficial to use some of your money to build up an emergency savings pot, save for a house, or simply save for a rainy day.
5. Create your budget planner
Now that you have an accurate idea of your monthly spending, it should be easier to create your own budget planner. You can use our easy budget planner template below to help you get started, and you can see how it’s done in the example we’ve provided. Simply input your average income, monthly outgoings and living expenses. Once that’s done, you could even work out an achievable monthly savings target and open a savings account, knowing that you can save a certain amount of money each month. It’s important to have a clear overview of your current finances before you start thinking about adjusting your spending.
6. Monitor and adjust your spending
Sticking to your new budget plan can be the hardest part of budgeting. It’s a good idea to revisit your budget planner each month so you stay on top of your finances and can easily identify if or where you’re overspending or saving. It’s important to keep track of your budget planner because you’ll notice any overspend more quickly and can make adjustments where you need to.
How to use our easy budget planner
Use our easy budget planner to organise your finances, get on top of your monthly expenditure, and work out where you’ll be able to make savings. You can see how it’s done with the example we’ve provided, and all you need to do is copy or print the blank budget planner, input your figures, and use the calculation at the end to get a complete picture of your finances.
Example budget planner
This example is based on the income from one adult in a small family household, with one child and no pets. As you’ll see, there is some money left over each month which could be used to grow a savings pot.
|Salary after tax||2000 €||24.000 €|
|Benefits and tax credits||200 €||2400 €|
|Other sources of income||-||-|
|Total income||2200 €||26.400 €|
|Mortgage/rent||500 €||6000 €|
|Water||30 €||360 €|
|Gas & electricity||40 €||480 €|
|Internet||25 €||300 €|
|Council tax||85 €||1020 €|
|Total household bills:||680 €||8160 €|
|Food & drink||300 €||3600 €|
|Mobile phone||35 €||420 €|
|Savings||50 €||600 €|
|Total living expenses:||385 €||4620 €|
Finances and Insurance
|Building insurance||20 €||240 €|
|Contents insurance||20 €||240 €|
|Life insurance||25 €||300 €|
|Loans||100 €||1200 €|
|Total finances and insurance:||165 €||1980 €|
|Children||250 €||3000 €|
|School||20 €||240 €|
|Total family expenses:||270 €||3240 €|
|Car||150 €||1800 €|
|Public transport||50 €||600 €|
|Total travel expenses:||200 €||2400 €|
|Entertainment||150 €||1800 €|
|Special occasions - holidays||200 €||2400 €|
|Total Leisure expenses:||350 €||4200 €|
|Total income||2200 €||26.400 €|
|Total Household bills||-680 €||-8160 €|
|Total Living Expenses||-385 €||-4620 €|
|Total Finances and Insurance||-165 €||-1980 €|
|Total Family Expenses||-270 €||-3240 €|
|Total Travel Expenses||-200 €||-2400 €|
|Total Leisure Expenses||-350 €||-4200 €|
|Budget:||150 €||1800 €|
Your budget planner
You can use this budget planner template to organise your finances.
|Salary after tax||Month||Year|
|Benefits and tax credits|
|Other sources of income|
|Gas & electricity|
|Total household bills:|
|Food & drink|
|Total living expenses:|
Finances and Insurance
|Total finances and insurance:|
|Total family expenses:|
|Total travel expenses:|
|Total Leisure expenses:|
|Total Household bills|
|Total Living Expenses|
|Total Finances and Insurance|
|Total Family Expenses|
|Total Travel Expenses|
|Total Leisure Expenses|