A few pounds here and there can quickly add up – and before you know it, your bank balance is shrinking faster than expected.
That’s why having a clear plan for your money is essential. By budgeting for savings, pensions, rent, food, treats, and more, you can avoid watching your payslip vanish without a trace.
It’s never too late to take control of your finances. With the costly summer season on the horizon, we’ve spoken to Amy Knight, a personal finance expert at NerdWallet UK, who has shared her top five budgeting tips to help you get started.
1. Go on money dates
“Set aside time to go through three to six months of bank statements, recording what you’ve actually spent in each area of your life,” advises Knight. “Although vital, this process can feel horrendously tedious and boring for some people, leading to procrastination, so call for back-up.
“My partner and I go on ‘money dates’ where we take our laptops down to our favourite cafe. We go through our recent spending, discuss any big expenses coming up, and talk about longer-term financial goals.
“Sharing your budgeting journey (sometimes called ‘loud budgeting’) can help make the process less scary.”
2. Split your payslip into different pots as soon as you get paid“Dividing your money into separate accounts or pots is a powerful way to take control of your finances, and choosing a bank account that automatically categorises transactions lets technology do some of the hard work for you,” says Knight. “Many online banking apps (including Monzo, Starling and Revolut) offer fantastic budgeting features which make budgeting feel effortless.”
Knight recommends transferring the money you’ve budgeted to each spending category – such as rent, bills, groceries, savings, holidays, and socialising – as soon as your payslip hits your account.
“This method is especially useful for managing annual expenses, like car insurance and servicing,” she adds. “By setting aside a small amount each month, you’ll be ready to pay the bill when it comes round.
“Ring-fencing funds for specific costs means you’re less likely to dip into savings or run out of cash before payday.”
3. Leave room for treats
Budgeting doesn’t mean you have to miss out on enjoyment – just make sure to set aside some money for the things you love.
“A bit like a successful diet factors in ‘cheat days’, you’re more likely to stick to a budget that has room for the occasional splurge,” says Knight. “Your supermarket shop will likely cost more in some months than others, depending on your social activities and how many weekends there are in the month.
“There’s no need to spend the maximum amount you’ve budgeted for if you don’t need to. During quieter months, you can build up extra cash to spend on hosting a bank holiday barbecue for your friends.”
4. Practice making trade-offsPrioritise things which are important to you.
“Budgeting is all about making empowered financial decisions, including what purchases to say no to in order to say yes to something more important,” highlights Knight. “For example, if you want to find room in your budget for a £50 monthly gym membership, are you prepared to sacrifice 13 takeaway coffees each month?
“If you’re already saving money by making coffee at home, consider other habitual purchases you could live without in order to prioritise spending more on bigger goals you’re working towards.”
5. Build financial resilience
“Building a savings pot for the unexpected is one of the smartest money moves you can make, because it enables you to cover costs you hadn’t planned for without derailing the rest of your budget,” says Knight.
The personal finance expert recommends aiming for three to six months’ worth of essential costs in an instant or easy-access savings account.
“If you’re starting from scratch, consider which discretionary purchases (such as fashion items, beauty products, streaming subscriptions or takeaways) could be reined in,” suggests Knight.
