Budgeting: this is how we do it

We’ve always been pretty good with money. This is less down to good organisation and more down to being responsible, and the fact that my husband hates getting his wallet out.

For as long as I can remember, we’ve been saving towards some sort of big goal – whether that’s buying a house, getting married etc., which has made it easy to understand our savings. We’d look at the bank and see that we had X amount saved towards our big goal, easy-peasy.

But, since saving for our wedding, budgeting hasn’t seemed so clear. We knew we had money but didn’t know how much we could spend on things and were almost afraid to spend in case something like an unexpected bill reared its ugly head and we got stuck. This is when we started working on a proper budget. One that covered all our goals.

For as long as I can remember, we’ve been saving towards some sort of big goal – whether that’s buying a house, getting married etc.

Let’s face it, the word budget is pretty boring. It conjures up thoughts of spreadsheets, formulas, things not adding up, and sitting at the dining table with your better half with a pile of bank statements looking very confused. All those things, I’m sure, you don’t want to be doing. I certainly don’t. So we didn’t do any of that. Instead, we approached it in a pretty simple way. We asked ourselves a few questions. One, how much money do we have? Two, what are all our bills? Three, what do we want to do/buy in the future? That was how we started.

First off, we looked at all of our accounts and added up all the money we had. We didn’t include any money that we knew was coming, like salaries or birthday gifts, we only dealt with real money that we actually had which kept it much simpler – that was our starting point.

Secondly, we wrote down all our outgoings; that’s the monthly bills and the yearly ones that can sometimes come as a bit of a shock, and the other less than exciting things like putting some aside for home and car maintenance. The yearly ones then got divided by 12 (or sometimes less, if the bill was due sooner) and those along with our monthly bills made up our ‘bill pot’. Now, as long as we had enough money in that pot every month we knew our bill would be paid.

By saving this way, we have exactly what we need when the holiday comes round – no struggling to pay for it with only two months to save.

Next, it was time to think about the fun stuff.

Do we want a holiday this year? Yeah! Well, how much do we want to spend on that? £2000. Right, well let’s spread the cost out and save £167 a month. By doing it this way, we have exactly what we need when the holiday comes round – no struggling to pay for it with only two months to save. We continued to do this; writing down everything we wanted to do or buy that isn’t an essential bill. These things don’t even need to be happening this year. Maybe a goal is a house deposit saved for three years time. Whatever it is, write it down and divide the amount up between the months.

By doing this, we now have ‘pots’ for things we need to pay or want to save for. Then, whenever we have any new money (i.e. our salary), we make sure to divide it all between the pots according to how much we need to save for a goal or to pay a bill. This way, all of our money is doing a job and working towards goals, fun things, and the essentials. It’s made our money so much clearer. By just having a quick look at our budget, we can know how much we can spend.

If you want to read some more about this way of budgeting, I believe a lot of people call it the ‘envelope system’.