Money Matters Team

Top Tips on How to Budget Better

By Money Matters Team 04/10/2021

Top Tips on How to Budget Better

If numbers aren’t your thing, the thought of building a household budget for you and your family might not fill you with excitement. But having a money plan in place and learning how to budget better is a smart move. And once you’ve set your budget up, you should find it a lot easier to keep tabs on your finances — so it’s worth the initial effort.

Not sure how to make a budget, or where to start? We’ve pulled together a handy roadmap of budgeting tips to help you get your money matters in order.

Why is budgeting important?

We all know that looking after our finances is a good idea. But perhaps you feel that checking your bank balance regularly is enough. After all, you’ve managed okay up until now. So why should you budget? And what are the advantages of budgeting when your finances are already quite healthy?

In short, a proper personal budget can help you cut costs, reduce any dept you have and save money. At its core, the purpose of a budget is to tell you if you’re spending more than you earn and help you understand what you can realistically afford to spend. This is obviously a bigger deal if you’re overspending by a lot and at risk of getting into serious debt.

But even if you’re living well within your means, you might find that you’re spending more than you thought you were or wasting money on things you don’t need. Money that could pay for that new kitchen or your dream wedding.

feet and shoes of a bride and groom


Before you build your budget

Sold on the idea of a creating a budget for yourself or your family? Before you get to it, here are a few things to bear in mind:

Who is the budget for?

If you live on your own, setting up a personal budget is relatively straightforward. But if you’re living with your family or a partner, it might be easier to create a joint budget that includes shared expenses.

Don’t underestimate your expenditure

Sometimes it’s tough to admit to yourself how much you spend each month on takeaways and online shopping. But for the budget to be effective, all the figures need to be accurate. If you’re not sure about something, it’s better to go high and overestimate the amount in question.

One-off costs and big spends

Make sure you allow space in your budget for one-off or irregular costs like clothes, holidays, special events and other big purchases. If you’re using a credit card or paying for something big in instalments, include the minimum or agreed monthly repayments in your budget.

Credit card debt and overdraft interest

Don’t forget to include in your budget any monthly interest that you’re charged for credit card debt or overdraft facilities, if you have either. This means no nasty surprises down the line.

Creating a budget – ready to get started?

To get a completely accurate overview of your income and outgoings, make sure you have any relevant paperwork handy. This could include things like:

  • Bank statements and payslips
  • Recent credit card bills
  • Household bills
  • Details of pension contributions
  • Information on savings and any other income

It’s a good idea to look at paperwork for at least three months, so you can get a clear picture of your longer-term expenses, as well as your typical monthly costs.

Start with your income

The first step of your budget is adding up your total income. This might just be your monthly salary or weekly wages, after any tax, pension contributions, loans, etc. have been deducted. But if you earn any other income, like interest on savings, rent from a property you let, or freelance payments, this should be included in your calculation.

If some of your income varies from month to month, add up what you earned over the last quarter and work out a monthly average.

Next, add up your essential spending

Essential spending is anything that you have to pay each month, like rent or mortgage, food, childcare, utility bills and regular travel costs. It should also include any fixed payments that you’re committed to, like gym memberships, broadband and mobile phone contracts.

It’s a good idea to keep all of these expenses as separate categories in your budget, so that you can see exactly where your money is going each month. That will also make it easier to figure out where you might be able to make cuts if your goal is to spend less or save more.

By adding up your total essential spending for the last three months, you’ll be able to work out your typical monthly expenditure.

How do you spend your disposable income?

Your household disposable income is what’s left when you deduct your average essential spending from your total monthly income. This is the money available to you for non-essentials, and it’s probably going to be the best place to start if you want to tighten your belt.

It’s important to look closely at how’ve spent your disposable income over the last few months and be honest with yourself about it.

Like with your essential spending, it’s useful to split your disposable income expenditure into categories, like nights out, clothes, takeaways, entertainment — and it should also include any regular amounts that you put into a savings account.

If you find that your total spending (including your non-essential spending) is often higher than your monthly income, you’re definitely in need of a budget.

top of a boutique shopping bag


Time to set your budget

With your average income and expenditure clearly mapped out, you should now have a good idea of how you are doing financially, and what you can expect your household disposable income to be going forward.

Provided you’ve split all your spending into distinct categories, you should also be able to see where you are spending your money, and where you could potentially spend less.

When you set your budget structure up, add your average monthly income and outgoing payments into the categories you’ve established.

Based on your total disposable income, decide on a realistic amount that you can afford to spend each month for each of the categories. You might have to be strict with yourself if you have a savings goal you want to reach.

Budget apps, templates and other budgeting tools

Need help getting your budget set up? Understanding how a budget works is one thing but creating one from scratch yourself isn’t necessarily easy.

Thankfully, there are lots of free templates, budget calculators and other tools you can use, like the Money Advice Service budget planner.

These days, there’s also a whole host of smartphone banking and budget apps that make keeping on top of your finances simple. You can connect existing bank accounts to many of these apps, allowing them automatically track your income and expenditure, and set up separate money pots or spending categories.

Whether you prefer something a bit more manual, like a weekly budget planner spreadsheet, or you like to manage your money with the help of a nifty online tool, learning how to budget better is a great life skill to have.

Tips to help you stick to your budget

man holding credit card and typing on a laptop


Once you’ve chosen your preferred budgeting tool and mapped out what you can afford to spend each month, there’s just the small matter of sticking to your plan.

Need some money-saving tips to help you stay on budget? Here are a few ideas to get you started:

Transfer debt to an interest-free credit card

If you’re paying interest on credit card or overdraft debt, you could consider applying for an interest-free credit card. If your application is successful, you can make a dent in your debt while enjoying a break from interest charges, which could save you a lot in the long run.

Use loyalty schemes and rewards credit cards

Being smart about using loyalty schemes and rewards credit cards that give you freebees and discounts can go a long way towards keeping costs down.

Food, petrol, travel, household goods, cultural events and fun experiences are just some of the things that rewards cards can help you earn.

Reduce your utility bills

Many of us tend to just accept increases in utility bills but questioning renewal quotes and haggling with your provider can pay off. Do some research to see what rates new customers are being offered by your supplier and elsewhere. And if your gas or electricity company won’t match the best deal, switch to a different provider.

Shop ethically and eat well for less

Shopping on a budget doesn’t have to mean eating junk food or buying from brands you don’t agree with. There are lots of ways you can eat healthily without breaking the bank, such as planning your meals, buying frozen foods or cooking from scratch.

Shopping on a budget doesn’t have to mean eating junk food or buying from brands you don’t agree with. There are lots of ways you can eat healthily without breaking the bank, such as planning your meals, buying frozen foods or And contrary to popular belief, shopping ethically on a budget isn’t impossible either. By saving on things like utility bills and groceries, you can still treat yourself to your favourite ethical products. In fact, 50% of respondents in a recent survey by Wealthify said they spend less than £50 a month on sustainable, ethical shopping.

Hopefully these budgeting and money-saving tips will help you save a bit of extra cash. If you’re looking for more ideas on boosting your finances, check out our blog on how to change your money mindset and start saving.

This Money Matters post aims to be informative and engaging. Though it may include tips and information, it does not constitute advice and should not be used as a basis for any financial decisions. Sainsbury's Bank accepts no responsibility for the opinions and views of external contributors and the content of external websites included within this post. Some links may take you to another Sainsbury's Bank page. All information in this post was correct at date of publication.