Planning a budget
How to manage your budget successfully
By Joe Elvin
Article 3 of 3
How to manage your budget successfully
Follow these four steps to ensure your household budget stays up to date and your spending remains under control.
Making a budget can be quite a satisfying process. After drawing one up, you’ll probably feel proud – and a little relieved - that you’ve seized control of your finances.
However, drawing up your budget isn’t the most important task when it comes to managing your money successfully; the key to effective budgeting is sticking to the spending plan you’ve made.
So, here are our experts’ top tips for managing your budget successfully:
Use several bank accounts to help you budget
If you’re one of the many people in Britain with more than one bank account, using several alongside one another could help you stay in control of your spending.
Dividing up your income each month and depositing portions into separate accounts – perhaps one for bills and another for spending on yourself – should help you avoid overspending in a single area.
Some people may even choose to open up a second current account specifically for this purpose, if they don’t already have a ‘spare’.
Although it’s a useful technique for anyone prone to losing track of how much money they have left for ‘fun’ each month, this ‘piggy banking’ method does mean keeping your eye on several sets of bank statements. You’ll need to be organised and stay on top of the extra paperwork it might generate.
Find out more: making the most of multiple current accounts - our expert guide
Check your bank statements and bills carefully
Keeping an eye on what money you have flowing into, and out of, your accounts each month is crucial if you’re keen for your budget to stay balanced.
Whether you receive your regular bank statements and bills through the post or online, make sure you check them to ensure that important transactions have been processed correctly – and to make sure that no suspicious spending is showing on your account.
Reviewing your spending on a monthly basis will highlight where you might be overdoing it, and should inspire you to cut back immediately if necessary.
Going through your bills and statements properly also means you’re likely to pick up any problems as they arise. For example, you’ll spot fraudulent activity on your accounts sooner rather than later, if this occurs.
Find out more: bank accounts - more than 50 current accounts rated
Consider keeping a spending diary
Making a note of all your spending for a few weeks is another way to check that your money really is going where you’d like it to.
It may seem tiresome to write everything down, but if you tend to spend using cash rather than a debit or credit card, you won’t be able to track where your money is going simply from looking at your bank statements and bills.
In addition, many people find that keeping a spending diary tends to concentrate their minds on what they’re spending. Somehow, knowing you’ll need to write it down can act as a disincentive if you’re about to splurge on something you could maybe live without!
Find out more: personal finance software - five popular packages reviewed
Regularly re-assess your budget
Finally, the key to managing your budget successfully is to ensure you revisit it – and revise it – on a regular basis. As your personal circumstances change, your budget will need to be amended, too.
Getting a promotion or pay rise should mean you rework your budget. While it may seem like an opportunity to loosen up your purse strings slightly, failing to take account of an income rise in your budget could mean you spend it indiscriminately and don’t truly make the most of it.
Each time there’s a change in your situation that will have an impact on your finances, be sure to look at how your budget can accommodate this.
Find out more: balancing your budget - how to improve your spending habits
- Last updated: April 2016
- Updated by: Joe Elvin