Build a Budget in 4 Simple Steps

A budget lets you feel more in control of your finances and can help you save towards your goals. Here are four simple and practical steps to get you started.

Step 1: Figure out where your money goes

Use your monthly bank statement to work out how much money you have coming in and how much is going out. Once you have a better understanding of your net income and how much you need to spend on food, bills, insurance etc in a month, you can tailor a budget to suit your needs.

Step 2: Follow the 50-30-20 budget rule

The 50-30-20 rule is a simple budgeting technique to help you manage your spending by dividing your take-home income into three categories that are allocated a percentage of your money as follows:

• 50% of your income on needs: essential living expenses, such as rent/mortgage, utility bills, food and car payments
• 30% on wants: any discretionary spending, such as dining out, clothes shopping, holidays and entertainment
• 20% on savings or debt: paying off debt, or putting money into a savings account, investment or retirement fund

We all have different financial situations, so your spending might not fit the 50-30-20 rule, but if it does, it could provide a solid framework to aim for each month. Even small changes, like making coffee at home instead of buying it out, can make a big difference over time.

Step 3: Track your money

Diligently recording your monthly budget is the key to success so decide whether you’re going to use an app on your smartphone, a spreadsheet or a notebook to track and categorise your spending. List your fixed and variable expenses.

Step 4: Review your budget

Life happens, so you will need to regularly review and readjust your budget accordingly. Maybe you got a promotion or decide to start saving for something new. Being flexible will help you stay on track in the long term.

A budget lets you feel more in control of your finances and can help you save towards your goals. Here are four simple and practical steps to get you started.