How to Successfully Budget on a Small Income

My two cents on how to budget.

Budgeting doesn’t come easily to everyone, especially if your income isn’t a huge amount (like mine) and even more so now a lot of us are having to live on 80% of our salary (including me). So I thought I would share my easy way that I work out my monthly budget – it’s not rocket science but it works. As with all of these ‘advice’ posts, this is what works for me but obviously you can adjust it. I have written these tips with your paycheck landing in your account at the end of the month (or the beginning of the month) which is how mine is paid but it can be adapted if you are paid mid month – see the end of the post for how to.

   

The first thing to do is to work out what your monthly expenditures are, I split mine into bills, travel, direct debits e.g gym membership and food, write it down on paper so it’s clear. Then I subtract this from my income and see what I have leftover. If you know you have a birthday or a night out coming up then put aside however much you’d like to spend, then I split the remaining between savings and ‘Day to Day’ or ‘Treat’ money.

I then transfer the money into my four different accounts. Bills and food go into the joint account as the Mr and I pay half of everything, savings go into my savings account, monthly recurring payments (Netflix etc.) stay in the current account and ‘Day to Day’ money is transferred over to my Monzo account. This results in me having three different cards but I do find it easier to manage my money this way. If there is only a certain amount of money in my Monzo account to spend it stops me me overspending. If I have a night out planned then I keep this money in my current account and then transfer it to the Monzo on the day – you could of course have two current accounts with your bank but I like that Monzo can be used abroad with no extra charges and you can see where you are spending the most money on the handy app.

A note on joint accounts; these are obviously only possible if you and your partner are comfortable in your relationship to have one. We only got one when we bought our house as it was easier than constantly transferring money to each other for various bills and mortgage payments but they’re not for everyone.

I prefer to do my travel weekly as it’s on my Oyster card, I could of course just use contactless but I sometimes am able to expense travel to my work so having it on an Oyster where I can print a receipt is more convenient, I am also notorious at losing my Oyster card so never want to put all my monthly travel money on one card just in case. I leave this money in my current account as it’s already been allocated.

With my ‘Day to Day’ money I am still quite conservative with it. If I want to buy something that isn’t essential, like a new swimming costume I will wait until the end of the month to purchase just to make sure that I have enough. It feels a bit ‘tight’ when you first start doing it but it does mean you end up with less impulse buys in your life.

 

If you don’t get paid at the beginning or end of the month but in the middle instead then it can seem a little bit more difficult as you can’t start the month with a topped up bank balance. However you just have to adjust when your bills are paid, which is easy with most companies and have them come out the day after you get paid, treat the middle of the month as the beginning of the month. Then you know where you are with your finances and can plan for what you can do before next pay day.

If you’re wondering why I haven’t mentioned overdrafts, it’s because I don’t have one and I also don’t have a credit card. Never have and I never will.

If you’ve got any good budgeting tips please leave them below in the comments.

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