How to find the right budgeting technique for you

Strategies for saving money aren’t one-size-fits-all. Each of us come with a unique financial situation, set of priorities, and mentality. So, to pick a method that you can stick to, it’s important to find a method that not only makes sense for your situation, but lines up with how you approach spending psychologically.

For example, if I have money sitting in my checking account, my brain automatically thinks it’s okay to spend, even if that money needs to last me through the month and it’s only the first week. So, my budgeting technique includes putting that money out of sight, so I only access it when I need it.

Here’s a few of the most common strategies people use for budgeting. It’s possible that some combination of these might work best for you rather than a single method.

Creating different pots

One popular saving method is to create different savings ‘pots’ for your expenses. A lot of banking apps, like Revolut or Monzo, will allow you to do this within the app which helps simplify the process.

To make your pots, think about your different expenses: food; housing costs like rent, utilities, and council tax; entertainment; and savings. To make this most accurate to your own life, look through your previous few months of expenses to see what you spend on, and the amount you spend. Use this as your guide for how much to put in each pot and then make reasonable cutbacks where you can.

Once you have your pots, you know exactly how much you can spend in each category. When you’re getting started, it might be helpful to reserve a little extra money to subsidise any pots where you come up short.

Essentials first

Another popular budgeting method is to do your essential spending and any saving as soon as you get your paycheque. This is particularly helpful if you’re looking to invest money: it’s easier to put it aside up front than try to save the money in your account until the end of the month.

You can also typically pay for expenses like rent, utilities, or council tax right away, or at least put that money somewhere separate so you know that it’s accounted for. With the essentials and savings taken care of, you know the rest of the money is free to be spent throughout the month.

To further categorise this, some people like to split their money by week. For example, if you had £1,200 to spend throughout the month after your bills and savings, you might give yourself £300 to spend every week and put the rest aside until the following. Some weeks will be more expensive than others, so you may find this is not a perfect system. But it can create a basic framework for not spending all your cash up front.

50/30/20 budgeting

The 50/30/20 budgeting strategy is likely the one you’ve heard of most, but it might take a bit of tweaking for it to be right for you. The idea of the 50/30/20 budget is that 50% of your income goes towards needs, 30% goes towards wants, and 20% is saved. Frankly, many of us will need to dedicate more than 50% of our income to needs: rent or a mortgage might account for that amount of your income by itself! But you can use the same system of a percentage split, with the percentages modified to be more reasonable for your budget. For example, you might need to put 65% towards needs, leaving 25% for wants and 15% for savings.

If you use this method, you’ll also need to identify what counts as a ‘want’ versus a ‘need’. You might decide your needs include grocery bills and toiletries like toothpaste, but a meal out with friends and a fancy body wash are considered wants. It might be worth writing down these distinctions if you will have a hard time holding yourself accountable.

Be kind to yourself

Budgets are a great thing to have in place, but sometimes, we will break our budgeting rules. Don’t panic if this happens, just reassess other areas where you might be able to cut back, and if possible, leave yourself a little excess cash to make room for these kinds of hiccups.