John-Paul Flintoff

Step3: Making a budget

I never expected to find any pleasure in drawing up a budget. For years, I hid behind the idea that “I'm a creative person”. Which may or may not be true, but I'm also not bad at drawing up a budget, and despite my resistance I find the process helpful and enjoyable.

A voice in your head might be saying, yeah, but not me! I'd rather go for a walk, or watch something on YouTube, or do anything at all but not make a budget. If that's happening, just tell your little voice that you wouldn't even be looking at this page if you didn't think there might be something useful about drawing up a budget.

How to start?
A budget is a way of tracking the flow of money in and out of your life. It can highlight things you may not have realised you are doing, and give you options to do things differently.

To begin, it can seem overwhelming. If so, take it just one day at a time. Begin on the first day of the month, to capture a picture of your daily expenditure, and if you keep it up then soon you'll have the weekly picture, and in no time a month will have passed.

With your monthly budget done, you can do a quick sum and work out an approximate annual budget. For me, this will be very approximate, because one month can be very different from another. But by keeping up your new habit you will get to see the true annual picture.

It gets easier
Is that voice back? Complaining about the idea of doing this for months on end? I thought so. But remember, you only have to do it one day at a time. It takes very little time on any given day. And the more time passes, the more you can replicate data from previous budgets.

So, gather together all your receipts, bills and bank statements, and download a template budget planner from sites like this one, which has a variety of good ones to choose from. Some things to consider:

  • Single or household? If you are single, it's much easier to gather all the data you need. If you aren't, it may be hard to make changes without capturing a picture of the whole household, and to do that will require an open and honest conversation about why this exercise even needs doing. For some people, even starting to talk about money can itself be a big obstacle.
  • Spreadsheet or bits of paper? Some people just don't like spreadsheets, and prefer to keep things on paper. That's fine. For me, it's a massive help to have spreadsheets automatically do all the calculations, and I find it easy to edit them on the go, using my phone.
  • Can you customise? Most of the free spreadsheet templates allow plenty of scope for you to customise, whether by changing the default currency or adding or removing categories of income and expense.

If you choose to do it on paper, you may still find a useful template somewhere online. Make sure it covers (at least) the following categories:

  • Income: salary, dividends, interest on savings, other investments
  • Home expenses: mortgage or rent, maintenance, insurance, property taxes
  • Transport: public transport, car, bike, maintenance and fuel costs
  • Utilities: water, electricity, gas, phone, internet and more
  • Medical: prescriptions, dental bills
  • Financial: bank fees, interest payments
  • Leisure: holidays, presents, pets, entertainment, eating out
  • Routine expenses: food, cosmetics, clothing
  • Family: childcare, tuition, clubs, pocket money

It seems like a lot. But budgeting really does get much easier. Once you have the picture of your expenditure, you may see some glaringly obvious things to change. Even if you don't, the process of drawing up a budget increases your awareness of spending. You become clearer about what you really need, and what you only want.

COMING SOON Step 4: Dig yourself out of debt