Making a budget plan | NatWest

 

 

 

Making a budget plan

What is a budget plan?

Are you looking to save for a deposit on your first home, clearing some of your debt, or putting money aside for retirement? Whatever your financial goals, you’ll need to keep track of how much money you are spending and how much you need to save each month.

A budget plan takes into account your monthly income and outgoings, so you have a clear idea of where your cash is going and how much you can afford to spend. Provided you stick to it, it’s a great way to manage your money – ensuring that you don’t spend more than you earn after payday.

Where do I get started with my budget plan?

You’ll need to start by gathering at least three months worth of paperwork, to help you build the full picture of your current finances.  This will include things like:

  • Bank statements
  • Debit and credit card statements
  • Payslips
  • Household bills
  • Receipts for cash items
  • Details of any savings or pension contributions
  • Figures and information about any additional income you receive
Woman on computer in living room

Woman on computer in living room

Calculating income

First, you’ll need to calculate your income. Make a list of earnings from your regular wage (after National Insurance and tax have been deducted), as well as any additional income you receive from other sources such as, rental properties or self-employment. Remember to  include anything you earn in addition to your regular income, like a work bonus for example. You’ll then be able to calculate overall totals for each ‘stream’ of your income as well as a ‘yearly earnings’ figure.

Work out your spending

Next, it’s time to  analyse your household bills, credit card bills, bank statements and receipts so that you have a clear idea of where your money is going. The essential bills you need to pay to run your home each month is a good place to start. After your mortgage or rent, work out how much you spend each month on council tax, buildings and contents insurance and any management fees on rental properties. Don’t forget your utilities (gas, electricity and water) and other regular bills for phones, internet, satellite or cable and TV license.

The essential bills you need to pay to run your home each month is a good place to start building your budget plan. After your mortgage or rent, work out how much you spend each month on council tax and any management fees on rental properties. Don’t forget your utilities (gas, electricity and water) and other regular bills for phones, internet, satellite or cable and TV license.

If you own a car, filling up with fuel isn’t the only thing to budget for - remember to include expenses like road tax, parking, insurance, MOTs and servicing. If you prefer public transport, calculate the cost of your travel ticket.

If you have children, don't forget to factor in childcare costs and the cost of any sports classes, lessons or clubs they go to. 

Looking after four legged family members can be costly too, so make sure you budget for everything from pet food to check-ups with the vet and vaccines.

Don’t just include everyday costs - you’ll also need to think about other spending like family days out, Christmas, holidays and birthdays. Add these costs into your list of expenses under a new column called ‘occasional outgoings’.

Try to avoid guess work as much as possible, because the more accurate your calculations are, the more useful your budget plan will be.  

Compare outgoings and incomings

Once you’ve got a good idea of your income and spending totals, you’ll need to compare these sums alongside each other. 

Subtract your annual and monthly spend figures from your annual and monthly income amount. Any shortfalls in your finances will be shown as a negative number.

If you find you have more money coming in than going out, creating a budget plan will help you keep on top of your finances and show you where you’ve got an opportunity to save. On the other hand,  if  you’re spending more than you earn, sticking to a budget plan is even more important to help you avoid falling into debt.  

You can use our budget calculator to help keep track of your income and outgoings and work out how much you have left at the end of every month.

Customise your budget plan and stick to it

A good budget plan will include how much you’re going to  to spend each month on key things. Divide your spending into categories so it’s easier to work out where you make cut backs or savings  to be able to meet your financial goals. Small changes – such as walking to work rather than driving, or taking a packed lunch each day – could quickly make a real  difference to your monthly spend.

Try to avoid guess work as much as possible, because the more accurate your calculations are, the more useful your budget plan will be.  

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