Five key steps to budgeting - Video script

Rachel Robson highlights five easy ways to master the art of budgeting.

In today’s video, I’m going to highlight five easy ways to help you get into the habit of budgeting.

1. Gather together your paperwork

The first thing you need to do is hunt out all your paperwork – this includes all of your bank statements, credit card statements, pay cheques, and utility bills. This will come in handy later on.

2. Understand your spending habits

To figure out what you’re spending where, it’s a good idea to set up a spending diary. A great way to do this is by using the online banking tool at lovemoney.com. If you register your accounts, every time you make a purchase, the tool will record it for you. It will also categorise all your transactions so you will know exactly what you are spending your money on each month.

Alternatively, just make a note of everything you spend on paper.

3. Make a list of your earnings and outgoings

The next step is to make a list of your earnings and outgoings. The paperwork you have gathered together, as well as your spending diary, should help you with this.

Make sure you’re honest when doing this and include all of your spending, including everything from birthday presents to holidays. You can then use this information to set yourself a budget.

The budgeting tab on the lovemoney.com online banking  tool will allow you to set a monthly budget for a specific category. So you’ll be able to track your progress through the month against the budget you set.

Alternatively, the FSA also offers a budgeting calculator.

4. Make cutbacks

Once you’ve done this, you should be able to see whether you are spending more than you earn. If you are, you need to make some cutbacks. Perhaps you could cut down on socialising, or quit the gym. Or maybe you could lower your food bills.

You can also use the lovemoney.com gas and electricity comparison tool to see whether you can get a better deal on your energy bills.

5. Get saving

If you have any spare cash at the end of the month, you should put it into a savings account. It’s worth setting up a standing order for this each month, to make sure you don’t get tempted to spend it instead.

To find the most competitive savings account, make sure you check out the lovemoney.com savings comparison centre.