How do you budget? Best way?

Mrs_A_2

I'm just adding to my budget spreadsheet.

At present, I just have XX left and use this to pay for 'entertainment, hair, beauty, presents, holidays' ....

Is it better to just work out how much I spend on these per month and budget that way?

I'm trying to improve things to build our savings.

Any helpful tips welcome! Thanks.

getmore4less

A budget is a plan in ADVANCE of how you will allocate future income.

A balanced budget will have ALL in income allocated to something(spends, savings...).

All you do then is track that you are spending it correctly.

So you do neither of your options.
(you don't spend what's left, you don't count what you spend and save what's left)

You create a balanced budget and move the allocations around till you are happy with the distribution of your income you PLAN what you are going to spend/save.

The more you breakdown the categories the better you can plan and control your spending/saving.

The longer term the goals you have the further into the future the planning needs to be.

Minimum is a years plan in detail, further out it can be a bit of guess as you will need to account for inflation/changes so you add say 5% to the gas bill for each year in advance and balance that year, as time goes on you get more and more accurate, I used to update the detailed forecast quite regularly when something changed or became known.

A spread sheet is fine but a lot of work to add the things you need for proper planning.

Tools like MSmoney already have this sort of thing built in and can do loads more planning reporting tracking.

To make your choices normalize on the total cost for a year for each category so you can compare where you get value for your money.

So decide how much you want to spend on "Hair" in a year and then make sure you only spend that amount, IF you need to change it(up or down) then you rework the plan, if spending less on hair allocate it somewhere else, if spending more it has to come from somewhere.

Long term goals help so create them and build a budget around them. the ultimate long term goal is retirement but start with something closer like save £xxx in 2years.

Chrisblue1962

Excellent post by getmore4less - nothing more I can add really...:)

I think Zero Sum Budgets are really good for making you make real choices and be realistic about spending in theory and then in practice.

forgotmyname

I worked all my fixed or stable figure bills and transfer that to a bill account + some extra to cover any increases and cover any ebay purchases i may make.

Bills that are not montly get added together and a monthly figure for those as well. They go into the bill account. So the tax and insurance are covered when the bill comes.

Then some to the wifes account for the shopping etc and some to the savings account.

Whats left over is what we have for any extra's.

The trick is spending less than you earn.

TooClumsy

Hi Mrs A!

I budget a month or two in advance-although this could be done as far as yearly.

I split up all costs into Fixed (any fixed costs (travelcard, savings and diesel) and bills-including credit cards, spotify etc-everything has a DD or SO in this block apart from travelcard and fuel) and fluid which includes my lunch, hubbies lunch, ebooks, apps, eating out, cinema, drinks out etc.

The fixed stays the same each month-I update the CC after I pay them as they change by a pound or so. The Fluid is changed each month based on birthdays, planned nights out etc. So I have a forecast amount for each row.

Once we get paid I 'actualise' the figures, each month is split into weeks and depending on when the bill/expense goes out in our accounts we put the figures in and there is a total at the end of the row to show its been paid.

If the total in the row is over the forecast it is in red, if its under-it is green. The amount that it is over or under by eg if I go over budget by £10 in one category-I will bring down another unspent category so that it is balanced.

So far, this has been working well for us! It requires proper planning before hand however-and you must balance the sheet and it works very well for us!

The best budget will work for you-consistently, you may have to tweak things here and there, once you have more history of the weeks/months/years.