Have you, like me, attempted to stick to a budget but failed mid-way? Or deemed keeping track of all expenses a daunting task? Regardless of experience, living from pay-check to pay-check usually makes it hard for anyone to improve their financial situation.

Fortunately, there are several effective strategies that can make budgeting easy. First though, it’s good to work out why you’re doing it. 

The preparation stage

When it comes to saving, I find it is vital to set some objectives: are you saving for a home deposit, maybe saving for a car, travel or simply to invest money? I find establishing the amount required to reach a goal can be very motivating.

Secondly, irrespective of one’s financial situation, it can be worthwhile to set money aside in an emergency fund to cover any unexpected costs such as car or home repairs, or even loss of income. Some people automatically sacrifice a certain proportion of their wages for this.

Read more: Setting up an emergency fund

Thirdly, I find it is handy to note all the due dates in the calendar for recurring bills including mortgage/rent, utilities, loans, insurances, etc., as this ensures that I don’t accrue fees due to late or missed payments.

Whilst doing this, I like to check bank statements (or receipts) and analyse spending patterns to cut down on any unnecessary expenses; you may ask yourself whether these purposes are really needed or simply wanted. The ‘wants’ might include subscriptions, streaming services or dining out regularly, whilst the ‘needs’ include groceries, fuel, transport, medical or studying expenses etc…

Another way to cut down on daily spending is by considering household habits. For example, we can all save electricity costs by switching off TVs or computers and hanging out the laundry instead of running the dryer. Moreover, it could be worth comparing utility providers and insurance companies for lower rates. While this can be time consuming, the outcome might just be worth it.

Once that is done, it’s time to work out the amount of take-home pay, which can be found on our payslip. If your income changes monthly, one method is to base your calculations on your lowest income.

Determine your budget

After the financial situation and goals have been established, it is time to create a budget centred on your requirements. Therefore, let me break down some popular budgeting tactics:

• The 80-20 rule simplifies budgeting challenges by allocating 80 per cent of your income to pay for essential expenses (bills, rent/mortgage, food) and any other requirements, whilst 20 per cent goes into savings.
• The 70-20-10 method eliminates micro-managing your expenses by dividing your income into three categories: spending, saving, and giving. Hence, you spend 70 per cent of your monthly income on essentials, you save 20 per cent and you give 10 per cent, which includes paying off any debt.
• The 60-30-10 strategy may work for determined savers or to swiftly pay off debt: it can fast-track financial goals by allocating 60 per cent of your income for savings, 30 per cent for monthly essentials and 10 per cent towards any other luxuries. However, this budget may not be suitable for those on lower incomes.
• The 50-30-20 plan prioritises monthly financial commitments by simply designating 50 per cent of your income for mandatory monthly expenses, 30 per cent is spent on treating yourself (dining out/take-away, entertainment, beauty etc…) and 20 per cent goes towards savings and/or investments, including the emergency fund.
• Finally, the 30-30-30-10 budget may speed up saving, with 30 per cent of your income allocated for rent or mortgage, 30 per cent for expenses including groceries, fuel, bills etc…, 30 per cent goes towards your savings and/or paying off debt and 10 per cent is for any indulgences.

These strategies show that creating a budget doesn’t need to be complicated. Importantly, distinguishing between ‘needs’, ‘wants’ and ‘goals’ can set us on a structured path towards achieving our financial aspirations.

This article does not constitute personal financial advice. If you need help with money, you can speak to a free financial counsellor via the National Debt Helpline 1800 007 007.