9 Super Easy Budgeting Tips for Beginners
I’m going to share with you budgeting tips for beginners.
I am going to use the national average income to show you how to budget (this is NOT our income or mortgage, I am using these numbers as an example of how to set up a frugal budget).
Here’s the method I use to budget with one income. (Note that I can’t disclose our income which is why I’m using the national average.)
National incomes and mortgages
I’ve done a lot of research to find the national monthly income in the UK after taxes are taken out, which is £2,100 (USD approximately $2,600).
I've also found the average price for a monthly mortgage, which is £723 (USD approximately $895) .
Of course, your income and mortgage may be more or less than the average.
I’ll use these numbers to show you how I prep and make my budget.
1. Write down your income
I use a good old fashioned pad of paper to budget. If I don’t write something down, it never happens so this just works best for me.
I write down how much money we will have coming into our account from wages.
If you get paid hourly, you can do what I did was to write down the minimum I thought I’d be paid for the month.
Anything extra can be a bonus that you can put right into the savings account.
2. Write everything down compulsory bills
Then I write down all the compulsory debits and bills that will come out of our account every single month, even if they are the same amount each month and do not change.
That means mortgage, taxes, gas and electric, water, internet, phone, life insurance, etc. All of these numbers are actually what we pay.
We have few bills to pay and the bills are small because we live frugally. Every few months we review our spending to see where to pull back.
For example, we do not have any streaming services. If we were really struggling for cash, there are things we can technically eliminate, such as a TV license.
3. Write down other outgoing bills
Add in the other outgoing costs that may technically change every month or week. It will be a rough amount we spend, such as groceries and fuel.
Star them so you know you can tinker with the numbers if you need to reduce your budget for the month.
I’ve also added in a sinking fund. A sinking fund is something that you save monthly for so that when a bill comes up you’ve already put the money aside.
This prevents you from going into debt. We put money aside for our car so when it comes to servicing it, we have the money in that account already.
4. Fill in numbers
I then go back through the list and add in each cost and what will come out of our accounts for compulsory bills and other outgoing bills.
Let me explain a couple of our low bills. We have low phone bills because we have second-hand phones with a SIM-only contract for £10 (USD $12.55) each.
Our life insurance is low because we took it out at 21 when we had our first baby.
If you wait until you are in your 30s, you may pay between £40 to £60 a month (USD $50 to $75).
For our cost of under £10 a month, we have a £250,000 (approximately USD $313,671.00) payout if something happens to one of us which is worth it.
5. Add up the numbers
I add up all the numbers in the compulsory column. Then I add in and tally up the estimated numbers in the non-compulsory costs we anticipate having to pay, like gas.
The gas and food shopping numbers will look different for everyone. We budget £400 (approximately USD $502) a month for our food shopping but that is absolutely everything that includes food for chickens, cleaning products, and the times we eat out if we eat out at all.
We often don’t even spend that much so anything that is left over at the end of the month goes into savings.
When we got married, we only had a budget of £25 (about USD $31) a week for our food!
6. Estimate the sinking fund
We have two small cars so we figured out it costs about £75 (about USD $94) a month for maintenance, servicing, and insurance for each of our cars.
We put £150 (about USD$188) into our sinking fund per month. If there’s ever a surplus, it stays in the account in case we need it to buy a new car.
7. Have a miscellaneous fund
There are things in life that you can’t budget for. This prevents us from taking money from savings or going into debt. We add £100 (about USD $125) every month.
8. Tally everything to see what’s left over
I will use my calculator to figure out what’s left over.
To do this, I punch in £2,100 pounds (about USD $2,635) into the calculator and minus the totals for the compulsory and non-compulsory bills I’ve added up.
In this scenario, we have £102 (USD $128) leftover that we can either use to pay off debt or put into savings.
9. Other income
If you live in the UK, you may get more income than just from a salary.
As a family of four with two children under the threshold we get an extra £145 a month as child benefits. You can add this into your main budget to add to savings or pay off debt, but we use ours for a kids' activity fund.
We have a separate savings account where we put this money. We also add an additional £10 (USD $12.55) into each child's savings account. This helps pay for holidays or activities so we don’t have to take money out of savings or go into debt to do these things.
A tip for adding money into savings
Rather than waiting until the end of the month to see how much you have left for savings, set it up as a direct deposit into your savings as soon as you get paid.
No matter how many good intentions you have, you’ll want to spend any extra money you see at the end of the month rather than put it into savings.
Budgeting tips for beginners
This is the way I budget and the best way I know how to budget money for beginners.
Did this frugal budget make sense to you? Let me know in the comments if this type of budget works for you.