14th April 2023
Did you know that more than half of the UK adult population does not have a personal budget? This comes as no surprise when we know 39% of Brits don’t feel comfortable managing their money.
But whether you’re a recent graduate starting your first job or a seasoned working woman, creating a budget is an essential step towards building financial independence. A budget helps you keep track of your expenses, prioritise your spending, and plan for your future financial goals.
Not to mention the peace of mind you feel by knowing you’re in control. Even if you’re not happy with where you are financially today, you can determine where you’re heading.
In this article, we’ll guide you through the steps to creating a personal finance budget that works for you.
The first step in creating a budget is determining your income. Make a list of all your sources of income, including your salary, side hustle(s), or any other money coming in. This number will be the foundation for your budget as it determines how much you can spend.
Next, it’s time to calculate your expenses. This can be broken down into two categories: fixed and variable expenses. Fixed expenses are regular payments you make such as rent, Netflix, mobile phone or car payments. Variable expenses include things like groceries, entertainment, and clothing.
Start by making a list of all your fixed expenses, including the amount due and the due date. Next, make a list of your variable expenses, estimating an average monthly cost for each. Once that’s complete, add up your total expenses for the month and work out how much you have left (income minus expenses).
Assessing your fixed and variable expenses is the next step towards creating your personal finance budget. It helps you to see where your money is going and where you can potentially cut back to create more disposable income.
Take a close look at your monthly bills and subscriptions to see where you can save. Are you paying for a gym membership that you rarely use? Do you have multiple streaming subscriptions that you don’t need? Consider cancelling these unnecessary expenses so you have enough spare cash to help with your long-term goal of building wealth. You may also be able to negotiate lower rates with service providers, such as your gas or phone network company. Comparison websites are great to help you find service providers and compare rates in minutes!
Variable expenses can be harder to track than fixed expenses. However, they can add up quickly and take a big chunk out of your budget without you even realising. Start tracking your variable expenses by going through your bank statement every month near your payday. Once you have a clear idea of how much you’re spending in each category, look for areas where you can cut back. For example, you might find that you’re spending too much on takeaway and you could actually save money by cooking at home more often.
Now that you know how much money is coming in and going out, as well as where you might be able to cut back, it’s time to figure out which budgeting strategy works best for you. You may find that once you’ve chosen an appropriate strategy, you’ll need to revise your expenses again, but they’ll give you a fair idea of what’s realistic for you right now.
Choosing the right budget approach for your personal finance budget is all about finding the method that works best for you. If you’re someone who values flexibility and wants to maintain a comfortable lifestyle, the 50/30/20 rule could be perfect for you. If you’re someone who wants to keep track of every penny and pay off debt quickly so you can start investing, then zero-based budgeting is likely your best bet. If you prefer a cash-based budgeting system, then envelope budgeting is the way to go. And if you want to prioritise your investments, then the pay-yourself-first budget approach is perfect for you.
Remember, there’s no one-size-fits-all approach to budgeting, and what works today for you, may not work tomorrow. It’s good to be flexible and regularly reassess.
Creating a personal budget isn’t just about allocating money to different places, it’s also about growing your money so you can be financially independent. In other words, you’re going to need to dedicate a portion of your income to investments. If, for example, you find the 50/30/20 approach works best for you, you may decide that from the 20%, half will go into investments.
Whether you have a high or low income, there’s something everyone can do to kick off their journey or contribute more towards our united financial goal: building wealth.
At Propelle, we understand the importance of investing and we are here to help women achieve their financial goals because we want us to win. Whether it’s to beat inflation, navigate the cost of living, leave something behind for your children or simply be rich, our mission is to help you get there through our tools, community, events and investing platform.
You can start your investment journey by signing up for our platform where you’ll access property investment opportunities in the UK, from as little as £1,000 (which is a relatively low amount to start with when compared to the deposit needed to buy an entire investment property yourself). The best part is you’ll also be a part of a wider community of like-minded women at different stages of their wealth-building journey. In our community, we run exciting events and have engaged communications channels for women to talk about all things money, finance and investing. Will we see you in Propelle?
Creating a personal finance budget is the first step in taking control of your finances and achieving your financial goals. However, the real work begins after the budget is created. Monitoring your spending and making adjustments as necessary is crucial to ensure that you stay on track.
It’s important to keep track of your expenses, which can be easily done using apps or spreadsheets. Reviewing your budget monthly allows you to identify areas where you may have overspent or where you have extra money left over. This review process can also help you identify patterns in your spending habits and make adjustments as necessary.
Remember, a budget is a living document that should change as your financial situation changes. Regularly monitoring and adjusting your budget can help you stay on track with your financial goals and build a strong foundation for your financial future.
As we’ve emphasised, creating a personal finance budget is an essential step towards building financial independence. Even if half of the UK isn’t budgeting, we don’t want you to be one of them. It helps you to keep track of your expenses, prioritise your spending, and take action towards building wealth.
By following the steps we’ve laid out in this article, you can gain control of your finances, see where your money is going, and potentially cut back on unnecessary expenses (or increase your income) to create more disposable funds.
Once you’ve got the basics covered, and with persistence and determination, you can start building your wealth and achieve financial independence.
📖 Next up:
🔗 How to build a better relationship with money