A millennial’s realistic guide to budgeting

Budgeting is a word that may bring to mind extreme behaviours, such as living off baked beans and spending every weekend at home to avoid spending money. As a result, it’s no surprise that the thought of budgeting can make you feel pretty bleak.

However, living to a budget doesn’t have to be horrible and there are ways you can cut back without completely altering your lifestyle. Here is our step-by-step guide to help you save some cash.

  1. Know what your money is being spent on

It’s hard to know where to start budgeting if you don’t really have a clue what your money is being spent on.

Start by pulling your bank statements for the last 3 months and work out the following:-

  • How much is being spent on rent/accommodation
  • How much is being spent on bills
  • How much is being spent paying back things like credit card balances and loans
  • How much is being spent on food and household items
  • How much is being spent on the gym/keep fit, if anything
  • How much is being spent on takeaways (include coffee shop purchases and days where you buy your lunch from a store, rather than bringing something from home)
  • How much is being spent on going out/socialising (even if it’s just a quick drink after work, factor it in)
  • How much is being spent on ‘treats’ (clothes, dvds, music, games, books, etc)
  • How much is being spent on holidays
  • How much are you currently saving, if anything

Once you’ve done this, you can pinpoint areas where you potentially overspend. Remember, it’s all about managing your incomings vs your outgoings.

  1. Don’t ignore debt

If you have debt or you’re relying too heavily on credit to fund your lifestyle, don’t ignore the problem.

If you’re in debt, take a look at what debt management options are available to you. Alternatively, if you’re relying too much on different types of credit, once you’ve followed the steps below to make your lifestyle more affordable.

  1. Start asking ‘do I need to do this?’

While you obviously need to do stuff like pay your bills, there are other things you probably do that you don’t need to do to the same extent that you currently do them.

So, for example, if you love buying clothes and spend between £100 – £150 on them each month, cutting that spend in half or by a third would give you extra money to put into savings or other things.

And don’t underestimate small savings like this. If you save £50 each month from making a small change, you’ll have an extra £600 over the year. Take this approach to a few areas of your life and you could see your savings pot start to increase nicely – especially if you start cutting back on expensive holidays or other equally large money drains.

  1. Plan ahead for extra spends

Now you know what your money goes on and where you can feasibly start to cut back, you have to have a reality check. With the best will in the world, you’re going to have some months when you’re going to spend more than others.

December is one that instantly springs to mind, but you may have family and friend’s birthdays that you need to take into account or you may be one of the 57% of Brits that know that they’re going to spend more in the summer[2]. Whatever it may be, you need to think about how you’re going to fund these extra expenses without falling off the budgeting bandwagon. Luckily, there are a few things you can do to ensure you have cash when you need it.

  • Earmark a small proportion of your savings fund to help you cover more expensive months and make a mental note that this is what this cash is for.
  • Cut back more severely in months where you can so you can splurge when you have to.
  • If you know that you’re going to have to spend more on nights out, for example, in one month, balance it out by reducing how much you spend on other things that month.
  • Look for discounts and deals to help reduce the impact of additional spending.
  1. Find tools, products and systems that make budgeting easier

Maybe a budgeting tool will help you out? Or separating your money out into different accounts, rather than leaving it all in one current account? Whatever it might be, there will be tools, products or approaches to budgeting that suit your personality and financial behaviour. You just have to do some research to find what works for you. To get you started, take our quiz to find out how your personality affects your approach to money and what you can do to better take control of your finances.

  1. Revisit and revise your budget

You might find that once you get in the swing of budgeting, you can actually make more cutbacks than you originally thought. Alternatively, you may find you were too ambitious when setting your original budget. That’s why it’s important to regularly revisit your plan and make changes when necessary.

[1] Noddle is a Credit Broker and not a lender. In providing this service, Noddle receives product data from TotallyMoney, who in turn receives this from independent sources. Rates may vary depending on your individual circumstances. Noddle.co.uk provide this independent service free of charge to you but will receive a commission from TotallyMoney who in turn may receive a commission from the brokers and creditors they refer to you.

[2] Noddle commissioned Opinium Research to interview 2,004 GB adults online from 16-19 March 2018. Results are weighted to be representative of the UK population. Sample size of 1,301 after ‘don’t know’ answers were removed – Opinium omnibus research, 16-20 March 2018