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How to create a budget

A budget can help you set out how you'll spend your money. You'll be able to see how much you have coming in and going out, and prioritise your spending accordingly.

This may help you make your money last and potentially help you save more each month. 

1. Decide how you’ll record your budget

Whether you want to use an app, a spreadsheet, or a notepad and pen, deciding how you'll stay on top of your budget can help you keep track. You'll also be able to update it over time to reflect any changes in your income.

2. Look at your income and expenses

Start by looking at your regular income, like your salary. If the amount changes each month, work out the average over the last 3 months. Then work out your average spending, using bank statements and your transaction history from the last 3 months.

Looking at your income vs your expenses can help you see whether you're living within your means, or if there are areas you need to cut back on.

You may want to split your outgoings into categories to see if you're overspending. These could include:

  • groceries
  • bills
  • loan repayments (rent, education, personal loan)
  • socialising
  • travel
  • entertainment
  • subscriptions

3. Make a spending plan

Whether you want to cut back on your spending or increase the amount you're saving, look at what you could potentially change. You might consider giving yourself limits in each of your spending categories. Or see if there are areas in your budget you can make changes, such as switching your mobile phone provider, or tariff.

Once you've decided where and how you'll make changes, try setting yourself a weekly or monthly spending goal and track your progress. Writing down a few reasons why you're creating a budget could help you stay focused.

Try to account for irregular costs too, such as booking flights or a weekend away with friends. Allocate a certain amount for them at the start of your budgeting period.

And if you have money allocated for savings, move it into a savings pot or account as soon as you get paid. This way you're not tempted to spend it elsewhere.

It's good to aim high, but be realistic: making things too hard could mean you get quickly disheartened.

4. Stick to your plan

Reviewing your spending regularly can help you stick to your budget. You can use HSBC online banking to track your transactions and your balance on a weekly basis. You may also want to review your budget at the end of each month or spending period using your bank statements.

To check your bank statement using your online banking:

  1. Log on to online banking
  2. Select eStatements to the left on the grey navigation bar
  3. Choose statement type, account and month
  4. Download the selected statement

You may find that some months are more expensive than others, and that's ok. If something isn't going to plan, you'll be able to see and possibly adjust your budget to reflect this.

If you're struggling to cover your short-term outgoings, an overdraft through your current account may help. Keep in mind, you may be charged interest for using an overdraft and you'll need to pay back what you borrow. If you go into your overdraft, create a plan to pay it off by a certain time and try to set aside money in your monthly budget to do so.  

What next?

Opening a savings account can give you somewhere to keep any money you've managed to save by budgeting.

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