A simple guide to budget planning


Where to start?

To make a budget plan, a good place to start is by looking at your regular income and expenses. These can include your personal or household income, then any bills, rent, mortgage, food costs, fuel and any other regular outgoings. This will give you an idea of what regularly enters and leaves your bank account each month, to help you to see how much is left and decide how you can use that remaining income.

There are many different methods out there. Think about what you need to spend money on in the future and start thinking about how you will finance it. Which budgeting method would work for you?

50/30/20 Rule

One method of budget planning is the 50/30/20 rule, which is:

  • 50% of your monthly income is spent on ‘needs’.
  • 30% is spent on ‘wants’.
  • 20% is saved for the future.

This method can help you to prioritise spending on what you need to get by. It also allows room for luxury items and saving for those future experiences, as well as being able to deal with those unexpected future costs, such as repairing a broken boiler or repairing your car when it breaks down.

80/20 Rule

Another method is the 80/20 method. This is:

  • 80% of your monthly income is spent where needed.
  • 20% is saved for the future.

This is a good method as it is nice and simple and allows for a mix of saving and spending. You can change the ratio of spending to saving as you like, but 20% saving is the recommended ratio.

Sub-Savings Account

The sub-savings account method is where you split your savings accounts between different savings goals. For example:

  • You need to save £1,000 for a holiday next July.
  • You also need to save £2,000 for house repairs for next September.

You can divide the amount of money by the months you have to save to calculate a monthly savings amount, and save a different amount into each sub-savings account each month.

This helps focus your saving and gives you reasons to save.

  • The information provided in this article is for guidance and educational purposes only. Police Credit Union Ltd. does not offer regulated financial advice. Please seek independent financial advice.

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