How to actually budget??

Matt8888

Every month, fill the virtual pots on your spreadsheet as you planned. Inevitably some pots will head towards overspend and others underspend (hopefully). So transfer money around pots to balance them with a knowledge of what is coming up, and some commons sense. But try at all costs not to change what money you put aside each month for savings. If you eat into that pot, you are "failing" and need to try more self control (which an be tricky). But moving money between your budgeted spend pots and/or letting them be negative some months is not a problem at all.

greensalad

One thing about YNAB that helps with the "1/12 of an annual spend" conundrum is that, once you get through the first year at least, you can save for things that would normally be monthly spends but might be up or down a little.

For example if you know you always spend £100 a year on kid's clothes because that's what you've spent the previous year you can start to plan for those spends coming up. You can maybe say "I've got a spare £100 this month, I'm just going to prefill the whole Kid's Clothes category for the whole year". Or you can stick with the £8.33 budget per month. You might not use it for a few months and then spend £20 on a pair of shoes, but the next month you only need to buy a few school shirts etc. It's never going to be spot-on perfect (that's why "roll with the punches" exists) but more years of data rolled into YNAB the easier it becomes to predict spending patterns or see where spending has gone over expectation.

I just passed my 2 year anniversary with YNAB (I started on 31st December 2018 as my New Year's Resolution for 2019) and 2020 was a year where a lot less surprised me because we'd been through the full cycle of Christmas, birthday gifts, car spends, medication spends, annual subscriptions etc. I now have an incredibly firm control on money IMO.

Mrs_F_2017

Another vote for YNAB here too - it really has changed my financial life especially once you get through your first full year and can see the annual spends as others have mentioned.  You could make a spreadsheet that tracked in a similar way but the YNAB is so user friendly - you can have it on multiple mobile apps so hubby and I both have it on our phones and you can use it on desktop too. 

As others have said, there is a 34 day free trial so well worth a go. 

Cheese1990

TBH when it comes to budgeting what I have found that works for me most effectively is to have 2 separate current accounts 1 which my salary goes into and which all my bills comes out of I.e. council tax, rent, gas and so on. Then I have a SO for a set amount each month that goes into the secondary account and this pays for all my food, leisure etc. for the month. I don't set aside a set amount for food etc. but once the spending money has gone it has gone then at the end of the month I look at both accounts and if I have money left then it goes into 2 different savings accounts so from the primary account it goes into long term savings and from the secondary account that goes into a treat fund for bigger purchases like a new pc. 

FootyFanDan

Ellie_BB said:

Ok, I admit it, I'm rubbish at budgeting! I am newly debt free (partly through hard work, but also partly thanks to the pandemic restrictions). Even after all this time, I still feel like I'm learning to be a DFW. I've used spreadsheets for years, but it has recently dawned on me that my 'budgeting' is more accurately described as watching myself overspend and going oops! I have revamped my spreadsheet and set up pots to try and plan better for non routine spending, but am already getting into a muddle and am really worried I'll be running up debt as soon as covid is sorted and life goes back to normal.

I have put money in my virtual pots, but this month I need less in some pots and more in others, and I don't know whether I simply take money from one pot to top up another, or let my sheet show that I'm over budget in a category. I know in theory the idea is not to spend more than I have in a pot, but if I need more than 1/12th of my annual cleaning supplies now, how do I manage that?? I feel really foolish for not having a better grip on this after all these years, but need your expert views - how do you manage budgeting?!?!

The very first paragraph resonated with me so much, pretty much coz this used to be me! I figured that I had an excel spreadsheet that told me how much income I had and where I would put that income so I budgeted...right? ha! The reality this was hardly ever stuck and didn't give me any idea of what I was spending with the exception that I knew I spent way too much on latte and pannini's. I slowly started to make changes and I started watching budgeting videos on YT and I stumbled across YNAB / Dave Ramsey and a few others and the more I listened the more I realised I was just spending til it was gone and not planning at all. YNAB and hard-work totally changed my financial views and whilst I am still not quite there yet I fully understand now where I am heading and no bills come as a shock. 

I knew I had to be strict but I also knew that in the early days I would go over budget somewhere, so rather than panic when I did I factored £50 into my budget that could be moved around just until I got into the give every penny a job routine and this helped massively - so if I needed extra food - an unplanned taxi I could take the £50 without impacting other areas of budget. It will seem hard to start but the more you build pots the better prepared you will be. Good luck

Singlespeeder

FootyFanDan said:

I knew I had to be strict but I also knew that in the early days I would go over budget somewhere, so rather than panic when I did I factored £50 into my budget that could be moved around just until I got into the give every penny a job routine and this helped massively - so if I needed extra food - an unplanned taxi I could take the £50 without impacting other areas of budget. It will seem hard to start but the more you build pots the better prepared you will be. Good luck

A £50 Emergency fund as it were ....

FootyFanDan

Singlespeeder said:

FootyFanDan said:

I knew I had to be strict but I also knew that in the early days I would go over budget somewhere, so rather than panic when I did I factored £50 into my budget that could be moved around just until I got into the give every penny a job routine and this helped massively - so if I needed extra food - an unplanned taxi I could take the £50 without impacting other areas of budget. It will seem hard to start but the more you build pots the better prepared you will be. Good luck

A £50 Emergency fund as it were ....

Ha yeah pretty much, admittedly in the early days of budgeting there were always little things that cropped up that took up the £50, but now it rarely gets touched because I have pretty much everything covered by some area of the budget. So when I get to pay-day again anything I have left either goes into the actual EF or off the debt. 

ThatKiss

This is one of those questions that doesn't have a right or wrong answer, but is more a case of what works best for you, as I think is shown by the range of responses given so far. For some that might be a heavily-categorised zero-based budget, for others it might be having multiple bank accounts to each cover different purposes. 

It's important to remember a budget is a plan, a prediction of what you'll spend. As with any other plan, there's always the chance something will change and you have to adapt. So, if you find you go over budget every now and then, it's not a disaster - that's why it's recommended to include an emergency fund as part of a budget, an in-built contingency. However, if you're going over budget every month, then the budget is wrong and needs a full review.

I personally budget on a monthly basis, and essentially use three "pots":
Bills - the current account I get paid into and which fixed payments (direct debits, standing orders, subscriptions) go out of.
Spends -  a separate account for groceries, petrol, leisure and ad hoc spends. Once it's gone it's gone.
Excess - At the moment this generally goes fully towards debt, but will in future go to savings. Larger expenses may come from here if required - car service and MOT for instance, and reduce the amount towards debt/savings.

I have a spreadsheet which I review before payday each month to calculate upcoming fixed payments (bills). Generally these are the same each month, mortgage, council tax, utilities, subscriptions, debt payments etc, but there might be a quarterly or annual expense due out that needs to be taken into account. There's a line in the spreadsheet for what I put into the spends account, but I don't manage that any further - so no breakdown of how much is groceries, how much is random spends etc. The excess is whatever is left after everything else is accounted for.

I could manage this more tightly, reviewing the spends account and reducing the outgoings from there for instance, but this works for me at the moment, and will hopefully become better-managed when I no longer have debt to pay and can save in advance for the likes of service/MOT/insurance etc.

Singlespeeder

I have two accounts, my current account into which my salary is paid and out of which all DD's go. I've stripped these down to the minimum and therefore know every month what is need to be left in there. I then have a Starling account ( I can't recommend this highly enough, I love it) which has the feature of saving 'spaces' - separate pots. 
Some time ago I got fed up with having "surprise" payments (that I was fully aware were on the horizon, but always got caught out by them) like car insurance & tax then the car breakdown, birthdays and Christmas, it's not like they are predictable .....
So I decided to have an "Annuals" space. I calculated how much I am prepared to spend on each category (£1500 a year) divided this by 12 = £125  ... then boosted that to £150 to be safe. 
I also allocate £250 pm for food, £50 for holidays & £100 for diesel every month and transfer these amounts in a single transaction (£550 altogether) to Starling and divvy out into the correct pot. 
If I have to pay for a Christmas present , I'll buy it, then move that amount from Annuals to the main account to cover it.
Anything  left in the food pot or the current account at the end of the month goes in to saving or debt clearance, as required.
It's not perfect, but it works really well for me.

kimwp

What are thoughts on credit card purchases? I usually account for these in the month the item is bought, but actually the money leaves my debit card account (which is where I do the summing up) the month after.