How to Budget Better: 2026 Guide
In today’s fast-paced world, mastering the art of budgeting is more important than ever. Whether you’re saving for a major purchase, paying off debt, or simply getting your family budget in order, having a solid budgeting strategy in place is essential.
Setting a budget can help you to become more aware of your spending and critique your habits. You may notice that you’re spending money on things you don’t need, and not saving money where you can! Follow these simple tips to budget better, spend less and save more!
7 Steps to Better Budgeting
Once you have a budget in place you’ll be able to manage your money more effectively which in turn will help you plan for the future and achieve your financial goals.
How to Budget Better
Set clear financial goals
The first step in budgeting better is to establish clear and achievable financial goals. Take some time to reflect on what you want to accomplish with your money in the short-term, medium-term, and long-term. Whether it’s saving for a deposit on a house, building an emergency fund, or planning for retirement, having specific goals in mind will provide you with a roadmap for your budgeting efforts.
Goals provide a benchmark for measuring your progress and success. By tracking your progress towards your goals, you can see how far you’ve come and identify areas where you may need to adjust your budget or spending habits. This feedback loop will help you to stay on track towards achieving your financial objectives.
Track your income and expenses
Once you’ve set your financial goals, it’s essential to track your income and expenses to understand where your money is going. Start by documenting all sources of income, including salaries, bonuses, and any other money coming in. Figure out your take home pay based on your salary with this tool.
Then, track your expenses by categorising them into fixed expenses (such as rent or mortgage payments, and household bills) and variable expenses (such as food, and entertainment).
This is a good opportunity to review your bills, consider the following questions and actions:
- Could I reduce my energy use?
- Am I spending money on things I don’t need?
- Cancel any unused subscriptions
- Compare broadband and TV deals
- Am I getting the best deal?
HSBC have a great app called Balance After Bills, which shows you how much you’ll have left once your regular bills and payments have come out of your account. Being conscious of your outgoings in relation to your income will help improve your financial fitness.
Prioritise debt
Prioritising debt within your budget involves allocating your available funds to debt repayment in a way that maximizes your progress towards becoming debt-free. For the sake of your wallet follow these simple steps to take back control over your debts.
- List your debts: Start by listing all your debts, including outstanding balances, interest rates, minimum monthly payments, and due dates.
- Determine minimum payments: Calculate the minimum payments required for each debt to avoid late fees and penalties. Ensure to include these minimum payments in your budget.
- Assess interest rates: Identify the interest rates associated with each debt. Typically, debts with higher interest rates cost you more over time, so it’s worth prioritising those first.
- Choose a repayment strategy: Decide on a debt repayment strategy that works best for your financial situation. Two common methods are the debt avalanche and the debt snowball.
- Adjust your budget: If necessary, adjust your budget to allocate more money towards debt repayment.
- Monitor progress: Regularly monitor your progress towards paying off your debts. Keep track of your remaining balances and stay focused on becoming debt-free.
If you’re being contacted by a debt collector like Wescot Glasgow for example, be aware that they have guidelines that they must follow including no aggressive practices, transparency and being considerate towards debtors experiencing difficulty.
Plan ahead with sinking funds
Incorporating sinking funds into your budget is a smart and proactive way to plan for future expenses and financial goals. Start by identifying upcoming expenses or goals, such as holidays, car repairs, or gifts. Estimate the costs of each item and prioritise them based on urgency and importance. Then, determine how much you need to save each month to reach your sinking fund goals and allocate manageable amounts within your budget.
Consider setting up separate savings accounts or budget categories for each sinking fund and automate your contributions by setting up automatic transfers from your current account. Regularly review and adjust your sinking fund contributions to accommodate changes in your financial situation.
Reduce non-essential spending
If we’re honest we all buy things we don’t need from time to time. But for the sake of your budget you need to reduce your non-essential spending. Reducing non-essential spending is a key strategy for optimising your budget and achieving your financial goals. Start by identifying areas where you tend to indulge in unnecessary purchases, such as:
- Dining out
- Entertainment
- Subscription services
- Impulse purchases
Once you’ve identified these areas, set limits or restrictions on your discretionary spending to curb temptation and stay within your budget. Consider implementing a “wait-and-see” approach for non-essential purchases, where you wait a set period of time before making a buying decision to avoid impulse buys. Additionally, explore cost-effective alternatives to expensive habits or hobbies, such as cooking at home instead of dining out or finding free or low-cost activities for entertainment.
Getting what you are entitled to could significantly reduce your outgoings, so if you work for a company that has discounts as company benefits or you have a disability which means you might qualify for some financial help like the NDIS funds, make sure that you have checked.
Build savings
Creating a savings habit is a fundamental step towards achieving financial goals such as saving money for a mortgage deposit, financing your first car or planning for retirement. Treat your savings contributions as non-negotiable expenses by making saving a regular part of your budget.
Your bank will offer you a variety of savings accounts, but traditional banks don’t always offer the best interest rates. There are some pretty decent easy-access savings accounts available right now including:
Best Easy Access Savings Accounts
- Tembo – 4.55% on up to £20k – easy access saver
- Zopa 4.45% AER – easy access account (+ 7.1% regular saver).
- Plum 3.05% AER – with the Plum 95 Day Notice Pocket.
- Monzo 2.75% AER – easy access account (+ £10 bonus for new users).
The 50/30/20 budget method
The 50/30/20 budget is a popular budgeting method that divides your income into three categories: needs, wants, and savings:
- 50% of your income should go towards needs, such as housing, transportation, utilities, groceries, and other essential expenses.
- 30% of your income should go towards wants, such as dining out, entertainment, shopping, and other non-essential expenses.
- 20% of your income should go towards savings, such as emergency funds, retirement savings, debt repayment, and other financial goals.
The 50/30/20 budget method is a popular tool for budgeting as it allows you to meet your financial obligations while also enjoying your life and saving for the future.
Increase your income
Side hustles are an increasingly popular way to make money for people who are struggling with their current budget. Some people sell their skills or make products to sell as a sole trader; others even make money through trading!
There are tons of ways that you can earn some extra money on the side, find a side hustle that works for your time availability, skills and interests.
More budgeting tips
I’m constantly adding new articles to my blog that should help you save more money, but for some quick inspiration I’d recommend the following articles:
Tips for Reducing Your Energy Bills
Get £5 FREE and Cashback on your Supermarket Shop
Taking the time to set yourself a budget is a brilliant way to gain control over your money. Use the opportunity to review your spending, set yourself goals, and introduce some positive financial habits.