Ultimate Guide to Budgeting – Managing Your Money

We're getting the hang of this budgeting stuff, so let's look at how best to manage our money.

Move Money Around on Payday

Once you have a figure for your monthly regular bills, sinking funds and short and long-term savings, you can simply leave that much money in your bills account. Let’s say your income is £2,500 and those bills add up to £1,500 for easy figures. That leaves £1,000 on top of the regular bills.

You need to move this money to a different bank account – your spending account. Do this on or just after payday. Given that most of your bills will be the same each month, you could just set this up as a standing order so it happens automatically. So now you have £1,000 sitting in a spending account.

THIS is the amount that we’re actually going to budget. This is the money you’re going to have day-to-day discretion on how it is spent. This is the money where you might be tempted by some new shoes or an outfit, or when your friends ask you to come out for a night out.

All perfectly legitimate uses of this money by the way. It’s also the money you need to buy food, put fuel in the car, pay into the biscuit kitty at work and all those little day-to-day expenses – Costa Coffee anyone?!

Having this money in a separate account means you actually have to budget far less than you otherwise would. It radically simplifies your life – always a good thing when it comes to finance – because you’re only really keeping tabs on a handful of categories at any one time. All the regular bills, debt repayments and savings are dealt with in the bills account – leaving just the day-to-day stuff to think about.

Don’t try to do this all in one account and just keep in your mind how much you need to cover your bills – that takes way more mental energy than is good for anyone! Even with some of the new challenger bank apps that have the ability to have virtual ‘pots,’ I still think it’s easier to have a physically separate account for day-to-day spending.

Budgeting as a Couple

I think it’s worth taking a brief aside here to talk about budgeting as a couple. Firstly – there’s no ‘right’ or ‘correct’ way to budget between two people. You may need to try a few approaches to determine what works for you. (I’m assuming for the purposes of this that being in a couple means you’re living together or at least have some common areas of your life that you’re financially providing for.)

So, you have two people with different incomes. Some of your bills will be your own, and some will be ‘couple bills.’ And then you’ll likely have your own individual spending money. Assuming you don’t just make everything joint, which is really not something to be taken lightly, then I’d suggest something like the following:

You’ll each be paid into your own accounts, then start with your individual commitments, particularly if that includes paying down personal debt. When you get paid, set aside exactly what you need for your own regular bills.

Then, whatever you decide each partner should pay into the communal ‘pot’ for running the house, buying food, saving for a holiday etc, pay that into a household bills account. Maybe make that joint, given that it’s for joint things. If you eat out every other week, use the communal pot for that too.

Then you’ll be left with your own personal spending money – shift that into your own personal spending account knowing that all your personal bills and joint bills are sorted. It’s just an expansion of the general principle of paying yourself first. That is, make sure everything important is looked after first, then juggle the day-to-day stuff.

This isn’t the space to go into the complexities of getting on the same page with a partner who maybe thinks differently, or what to do in situations where there are wildly different earnings levels.

All I’ll say here is to tread lightly, and look after number one. As long as you can eat and keep the heating on, and that’s all you can get your partner to agree to, so be it. You look after your own budget and savings. Compromise but don’t carry your partner more than you’re happy to do.