Budgeting 101: How to Set a Limit and Stick to It

If you’re a self-confessed reckless spender and find money management an ongoing chore, changing the habit of a lifetime can be a daunting prospect – but with a strict budget and a healthy dollop of self-discipline, you can take the reins and get your spending under control once and for all.

If you’re looking to save money for a large purchase or a rainy day, these no-nonsense tips will help you figure out how to budget and transform your personal finances over time – beginning with the baby steps needed to get you headed in the right direction.

Prioritise the bare necessities

It goes without saying that life’s essentials are the top priority when it comes to your spending – so that includes food, shelter, clothing, utilities and transport. These are non-negotiables that should always be accounted for first in any budget, ensuring you’re never left short on all the things that keep a roof over your head and keep you happy and comfortable on a day-to-day basis.

Set (and stick to) a schedule

Creating a new habit isn’t easy – especially when it involves reversing one you currently have – but one significant step you can take towards responsible and restrained spending is to set out a rigid schedule and plan your expenditure around this timeline. For example, you may want to choose a specific day of the week for your grocery shopping and organise your direct debits so that they all come out like clockwork at the same time of the month. That way, you can quickly become familiar with how your personal cash flow changes over the course of a month and avoid any unwanted surprises in your account.

Pay with cash where possible

Contactless payments in particular have made spending money practically effortless, which may, at first glance, feel liberating – but this development has actually placed significant strain on those who already find it hard to know how to budget money and to save. To break the cycle of impulsive debit card transactions, resign yourself to paying with cash wherever you possibly can. This approach will add an extra obstacle that may prevent some questionable and unnecessary purchases – a seemingly insignificant lifestyle change that can have a dramatic positive impact in the long term.

Experiment with budget types

There’s far more to budgeting than simply spending less, and this is where different budget types come in. Here are a few of the most popular options to give you some brief insight into the world of possibility that awaits you as an aspiring budgeter:

  • The 50/30/20 budget: 50% of your income goes on the things you need, 30% on the things you want and 20% on savings and debt repayment.
  • Budgeting to zero: At the start of every month, take control of your spending by planning how you’ll spend your money down to the very last penny, including the savings you plan to put away.
  • The 5-category budget: Separate your spending into the 5 all-important categories and spend a percentage of your income on each – housing (35%), transportation (15%), other living expenses (25%), savings (10%) and debt payoff (15%).

Explore online budgeting tools

Finally, to help you keep a close eye on your in-comings and outgoings and ensure a healthy equilibrium is always maintained, there are a broad spectrum of budgeting tools out there that can make responsible spending a relative breeze. Feast your eyes on a few of the best:

  • Mint: Giving you a 360° view of your finances, Mint works to create a custom financial plan for you, while offering budgeting tips designed to help you identify and eradicate unnecessary expenses.
  • Wally: This is an essential app for anyone looking to compare what they’re earning with what they’re spending – providing granular information on the details of all purchases tracked through the app, with the ability to take and store photos of all your receipts, too.
  • Demotivator: The companion app to MoneySavingExpert’s Budget Planner, this app has a single, noble purpose: to shock and shame you into ditching your bad spending habits once and for all. From cigarettes to snacks, the app will hold a mirror up to your reckless spending and show you the long-term impact of this impulsivity.

With these simple and effective budgeting tips at the forefront of your mind, you’ll have a handle on your personal finances in no time and can begin making more out of your money – whether you’re looking to consolidate your debts, save for some costly home improvements or absolutely anything else.

Calculator and laptop on desk for budgeting