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Clever budgeting techniques

Most of us know we should be spending less, but sometimes it feels, well, next to impossible – especially when we don’t know what we’re spending our money on. But the truth is, that budgeting is much easier when you have a few money management tricks up your sleeve.


Published

31 Jul 2017

Let’s take a look at our favourite budgeting techniques:

The 50/30/20 rule

We always say that budgeting isn’t about numbers but about your mind set. And that’s true - apart from this technique - which is all about numbers.

All you have to do is divide the money you’ve got coming into a neat 50/30/20 split. Your aim is to allocate your budget as follows:

1. 50% on needs

2. 20% on debt or savings

3. 30% on wants

The order of this is key, do not move past step 2 to 3 until you have taken care of all costs in steps 1 and 2.

This method is great for helping you get into good money habits. You attend to the things you should be doing like paying bills, clearing debt or saving what you can and you still get to enjoy the money you’ve earned too.

1. Needs

Allocate the first half of your money to things you need to buy. Now, ‘need’ can be subjective -  ‘I need those shoes’ is case in point - so when we talk about needs here we mean real, proper needs. Think mortgage, gas bills and travel. Not your Sky package or that unused gym membership that you’ve forgotten about.

Paying less than 50% on things you need? Great. You’ll be able to put more towards your debts or savings – or those ‘wants’ you’ve got in mind.

Paying more than 50% on things you need? Then you need to make up the difference from the ‘wants’ allocation E.g. if your needs amount to 60% then your ‘wants’ budget is now 20%.

man looking at their Tesco Bank statement

2. Debt or savings

The last 20%, and anything left over from before, should be used towards paying off any outstanding debt such as credit cards or loans. If there’s nothing to pay then that amount should go into a savings pot.

toddler planting flowers

Eating a big slice of chocolate cake

3. Wants

The next 30% is for you to spend any way you want. Whether that’s a gym membership, eating out, Netflix, a holiday, a new pair of shoes is up to you. Anything left over can go into your savings account.

The envelope system 

Fear not. We aren’t suggesting that you put your hard earned cash into an envelope which could end up in the recycling bin by mistake.

This method helps you divide your money 21st century style. Instead of putting your money in paper envelopes, you divide it between separate accounts.

For example:

1. You have a main account that your salary goes into is used to pay all your Direct Debits and regular outgoings by standing order. You do not transact on this account at all apart from this.

2. You transfer an everyday spending budget into a second account that you use for your regular expenses throughout the month e.g. food shopping, travel, petrol, entertainment.

3. Last and by no means least, your savings account sits separately. Set up a Direct Debit on pay day with a regular payment into this account. This is your rainy day fund for whatever your savings goals are – a house deposit, holiday, maternity/paternity leave or just to have as an emergency fund.

There are various accounts on the market which can be used as a secondary account. With a Tesco Bank current account you can have 2 current accounts which would allow you to work on this method of budgeting.

This method can be great if you have bills that come out of your account throughout the month which can make it tricky to keep on top of. This way, your ‘essentials’ and ‘wants’ sit in completely separate accounts so should help you inadvertently  overspending on one area.

There’s an app for that

There are some great apps on the market that can help you budget like a pro. Whether it’s through your own mobile banking app or an app that’s specific to budgeting, we’ve got it covered. Here’s a flavour to see how each may help you:

Customer looking at their budget with the Tesco Bank mobile app

Mobile banking apps

Most high street banks will have an official banking app, which will give you access to your accounts at the touch of a button. The main benefit being you’ve got a single view of all of your bank accounts in one place. Making it easy to track spending, transactions and payments.

Our app does just that and more. Making day-to-day banking as simple as possible, whilst giving you plenty of detail to help you plan ahead.  See how you can benefit from downloading our app.

Budgeting apps

Alternatively why not try some of the most popular budgeting apps out there:

  • Spending Tracker: This app lets you track your weekly, monthly or yearly spending. The Budget Mode option helps you manage your spending targets, and clear progress summaries show your main areas of spending.
  • Money Dashboard: This app makes it easy to see where your money goes day-to-day, thanks to clear and colourful graphs.

Apps are a really handy way to check your money situation, wherever you are. So if you often don’t actually realise how much you’ve spent, or overspent, then a budgeting app could be the perfect way to keep you on track.

Find out more about our current account and savings products

Important information

The content on this page aims to offer an informative introduction to the subject matter but does not constitute expert financial advice specific to your own situation. All facts and figures were correct at time of publication and were compiled using a range of sources.