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Budgeting For Beginners In 2022 | How To Budget

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Budget Management Skills: Definition and Examples

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Learn about 12 important budget management skills you can use when creating budgets, plus how to use them in the workplace and feature them on applications.

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11 budgeting skills everyone should know.

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11 budgeting skills everyone should know.

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Budgeting. In some of our lives, it's known as "the b-word."

If you've never budgeted before, it can seem like a gargantuan task that only produces something that will make you miserable. And if you consider yourself bad with money or find that you have a difficult time living within your means, budgeting can feel like one more way to fail financially.

But budgeting doesn't have to be any of these things. It doesn't have to take a lot of time and energy, and it can free you so that you can save for the things that you really want. It can also help you understand why you spend the way you do, and help you get a handle on it.

The key to making your budget into a friend and not a foe is having the right set of skills to make it happen. Here are a few of those.

1. See Money as a Tool

We tend to think of money in a lot of different ways. Money can be freedom, it can be despair, it can mean power or significance, or any one of a number of things. The point is, to be good at budgeting, develop the mindset that money is a tool. It helps you do the things that you want and need to do. No matter how much or how little you have, your money can help you achieve your goals.

2. Record Your Transactions

On a practical level, you will need a record of your transactions to start a budget, and you will need to keep recording them to continue budgeting. You can do this by hand, via an app, or once a week on a spreadsheet. Do it however works for you, but learn to record your transactions and you will be well on your way to budgeting.

3. Assess Your Spending

Recording your transactions won't help if you never think about them. Learn to categorize your transactions in whatever way is meaningful for you, so you can see how much you're spending in different areas. This can help you decide where to spend more, where to spend less, and what cutting back might look like in your everyday life.

4. Make a Budget

This might be the most obvious skill in this list, but it's also one of the most important. There are spreadsheets you can download, programs like YNAB and Mint that help you see your spending in different ways, and more. Some things to think about before you choose a method involve deciding whether you want to go old school or online, and whether you want to store it on your personal computer or in the cloud.

5. Write It Out

Throughout the budgeting and recording process, it will help if you actually write things out. This can be on a computer, though there is something about the act of writing something and then seeing it there in your own handwriting that helps you remember. Whatever you do, don't keep your budget in your head. It's easy for numbers to become fuzzy and for you to forget about your budget entirely. Instead, put your budget where you can see it often, so that it feels real and you remember your goals.

6. Plan Ahead

When you make your budget, don't just think about what you need right now, or even your monthly expenses. Think, too, about expenses that only come around every so often. Car insurance, life insurance, and property taxes are a few line items that can fall into these categories. Then, save a little bit of money every month toward these items, so you can pay them without worry when that bill shows up.

7. Include Spending Money

If you don't have spending money, you will feel like your budget is a cage you need to break out of, rather than a structure supporting you and your goals. Even if all you can afford is $5, give yourself something. This can go against the grain, especially if you have a lot of debt or very little income. However, you are important. And you will be happier keeping your budget if you know you have a little money you can spend however you want.

8. Make a System That Works for You

It's easy to get sucked into a system that doesn't work for you. For instance, you may not be able to track your spending every day. If that's you, then don't buy into a budgeting system that requires this. There are plenty of systems where you can record once a week, or so. If the system doesn't work for you, you won't do it, and there won't be any value to budgeting. Keep trying things until you find something you like.

9. Live With Discipline

This is a huge skill and one that won't happen overnight. Living a disciplined life, though, will go far toward helping you make and keep your budget. Pay attention to your budget. Update it. And when you don't have any money left for something, stop spending! It can help to breathe through your desires, to remind yourself of your bigger goals, and to give yourself a waiting period before you buy things.

10. Know When to Splurge

This is a tricky skill, especially in light of the one above. However, there are times in every life when it's right to splurge. This doesn't have to be a huge spending binge - it can be something as small as a coffee with a friend. A lot of times, this comes into play when you choose to buy something of a higher quality even though it costs more. It's up to you to decide when to splurge, but make sure there's some room for it in your financial life.

11. Ask Yourself Hard Questions

When you're budgeting alone or you are the one in charge of the budget, it can be easy to let things slide. Get into the habit of asking yourself hard questions, like, "Why do I always spend too much on entertainment?" and "Am I realistically able to take that vacation this year?" You may not like the answers you find, but being honest with yourself will ultimately help you become more aware of who you are and how things work inside of you - which will help you meet your goals, financial and otherwise.
Are there any other budgeting skills that are important to you? Which ones are they?
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11 Budgeting Skills Everyone Should Master

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Budgeting. In some of our lives, it's known as "the b-word." If you've never budgeted before, it can seem like a gargantuan task that only produces something that will make you miserable. And if you consider yourself bad with money or find that you have a difficult time living within your means, budgeting can feel like one more way to fail financially.

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What is a financial budget?

Budgeting is the act of dividing up a limited resource.

When we think about budgeting in the context of personal finances, it's really the process of managing income and expenses.

A budget helps you organise the way you allocate your money so that there's enough to cover immediate bills, and you also include provision for your future self and any children that you already have or may plan to have 🌱

Why a budget is important

Creating and sticking to a budget is a key life skill and an essential aspect of money management that can help you achieve your financial goals.

Like any life skill, your ability to budget will get better with time and practice!

Having a budget in place is a great way of ensuring that you don't get into debt. Plus, by paying your bills on time you can build a healthy credit score and get access to better rates on personal loans or mortgages in the future.

Why is budgeting hard?

Budgeting can feel difficult because it's human nature to prioritise short-term gratification over longer-term priorities. That's a scientific fact 🤓

However, like any life skill, the trick to making budgeting feel easier is simply by gaining more practice and experience!

There are also some ways you can use science to boost your budgeting willpower too. See our section on 'tips for sticking to your budget' below 👇

The benefits of budgeting

The most immediate benefit of creating a budget is that you shouldn't run out of money when you need it. Which also means less stress!

A budget forms part of your overall personal financial strategy to make sure you can weather financial storms and have money saved for a rainy day ☔️

If you're struggling with debt, then a well crafted budget, combined with careful use of credit, can help you gain control of interest payments and pay off what you owe once and for all.

Budgeting can also help you reach your saving goals and live the life you want to live 🏖 By tracking your spending and managing your cash flow day-by-day you can move closer to your long term dreams!

How to improve budgeting skill

Step.1 Record

Track your average income and the fixed expenses that you know you'll need to cover with that monthly income 📊 Even if you get paid weekly it's easiest to work out your budget over a month, as this is how most bills are paid.

In addition to monthly bills, you'll also need to account for less regular annual expenses, like car insurance / maintenance and yearly subscriptions.

Top budgeting tip 💡

This is a great time to identify where you can make immediate savings from your regular payments. You could cancel unwanted subscriptions or compare bills and switch suppliers to reduce the cost of your household utility bills.

Step.2 Prioritise

Having built an understanding of your earning and spending you'll now need to allocate money for your needs, wants, and savings.

The amount you assign in each category is up to you, but a common budgeting rule-of-thumb is the '50/30/20 Rule'. It's a bit like traditional envelope or jam-jar budgeting (which works by separating physical cash for outgoings) and is a great way of facing up to some tough trade-offs ⚖️

Top budgeting tip 💡

Setting goals for your saving targets can actually help you achieve them quicker. It's important to have room in your budget for some fun money, but giving yourself a specific aim can encourage you to stay focused on saving.

Step.3 Automate

Once you've figured out your budget, you'll need to apply it. Tackling your financial accounts to create a spending and savings plan is a rewarding process... but probably not something you want to repeat every month 🤓

To automate your budget, set up standing orders to separate out savings from spending money, and create Direct Debits to pay your bills on time.

Top budgeting tip 💡

Standing orders are fine for fixed payments, but not so good when it comes to accounting for varying amounts, based on your spending. You can use the free version of an app like Plum which automates additional savings too!

Tips for sticking to your budget

Setting a budget is a great start if you're serious about saving money, but good intentions only go so far when temptation comes calling.

If you need a helping hand, here's how to stick to your budget:

Tip.1: Pay yourself first

When it comes to saving money we all face our own particular challenges, but one thing is universal... life always finds a way to interfere!

It's essential to save when you first get paid by immediately transferring the money out of your current account and into separate savings accounts. It's easier to manage your finances when you can see how much you have to last until payday. And you might be less tempted to dip into your savings 😈

Tip.2: Track your spending

No matter how disciplined we are, there are always spending urges we struggle to control. Resisting impulse buys is a key part of the budgeting process, and one trick that might be able to help is the '30 Day Rule'.

The idea is that if you're tempted to make an unplanned purchase, you walk away from the situation and make a note of the item, price and date. You can then revisit the decision later and avoid buying something you might regret.

Tip.3: Make your money go further!

Getting to grips with financial planning to create a budget can be laborious, but thanks to Open Banking there are financial products available which use the latest technology in an app to simplify the process for you.

For example, Plum is a free budgeting app, regulated by the Financial Conduct Authority (FCA), which can help you budget by providing a real-time view of your spending across all your bank accounts and credit cards.

The app automatically gives you an adjusted balance, which takes into account any regular payments due before your next payday, and there's a money dashboard you can use to track and compare your spending.

To learn more about Plum you can check out our website.
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Budgeting is the act of dividing up a limited resource. When we think about budgeting in the context of personal finances, it's really the process of managing income and expenses.

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It might be hard to think about setting aside any money as savings, but at the very least it's a good idea to try and have some emergency savings.

Emergency savings is money to fall back on if you have an emergency, such as a boiler breakdown or if you can't work for a while.

You want to be able to pay for an unexpected repair, but it's also important to have enough money for a few months in a sticky situation.

Say you lost your job or split up with your partner, and needed some time to get back on your feet - you'll want a bit more than the cost of a new boiler or washing machine.

Don't worry if you can't save this straight away but keep it as a target to aim for.

The best way to save money is to pay some money into a savings account every month.

Once you've set aside your emergency fund, possible savings goals to consider might include:

buying a car without taking out a loan

taking a holiday without having to worry about the bills when you get back

having some extra money to draw on while you're on maternity or paternity leave.

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Beginner's guide to managing your money | MoneyHelper

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It might be hard to think about setting aside any money as savings, but at the very least it's a good idea to try and have some emergency savings. Emergency savings is money to fall back on if you have an emergency, such as a boiler breakdown or if you can't work for a while.