Beginners Guide to Budgeting

Another post in my series of content sharing excerpts from my book, The Money Guide to Transform Your Life. I want to share a beginners guide to budgeting.

I have a whole chapter dedicated to budgeting, but wanted to share some of the key messages to help those who regularly message me asking for more info on budgeting.

Budgeting is the core of money management

Let’s talk budgeting. Please do not scream out “boring”, I will make it as painless and simple for you as I possibly can . Budgeting is the core of getting in control of personal finance and understanding of your money. The first question is, are you prepared to tackle you budget in order to gain financial control and freedom?

Here is how I budget

I start with a detailed spending diary of everything that costs me any money. This will include monthly bills, PayPal payments, credit card payments, any cash transactions, any contactless payments, savings, pension contributions, business expenses. Absolutely everything.

I have found the best way to do this is to either write everything down at the end of each day in a crisp new spending diary notebook. Or to keep a list in a spreadsheet. I have tried both. Once in the habit (habits take 6 weeks to make or break!) you will go to that spending diary each day and write down your spending. Also check out Money Dashboard [aff link] for a FREE app based solution, that collates info from all your cards and accounts to help you to categorise spending.

I enjoy the mental process of writing everything down and thinking about what I have spent and why. Was it an essential, was it an emotional purchase, was it worth the money spent or a waste?

Spending Diary

The inner workings of other people’s finances aren’t often on display and yet they can be very useful. During Coronavirus Lockdown I published a weekly record of my spends which you may find useful to have a look at.

One of the most powerful ways of using a spending diary is to spot emotionally ‘down’ days and comparing this to spending. I know I have a tendency towards emotional spending, sometimes it makes me feel better, but does it? Do I really feel better after that initial buzz of buying something new that I probably already have another three versions of at home. I counted my blouses recently. I have 22. This is excessive, I must stop buying blouses.

Create your own budget

Very simply put a budget compares  your income and your expenses. The first key test of any budget is –  Is my income is higher than my expenses. For most of my life my expenses were higher than my income, hence having credit card debt from the age of 18 through to 42.

Use your spending diary to create a list of your expenses.

Start with your essential, must pay bills, I include rent, mortgage, council tax, electricity/gas, water, school cost, broadband, mobile, insurances, loan payments, credit card payments, car finance, car tax, personal tax and national insurance if self-employed.

Next list your regular variable monthly living costs, including groceries, petrol, train travel, eating out, takeaways, clothes, family entertainment, personal fun money, gifts, charity donations.

The next thing to list out is more irregular cost that might hit every 2 months, every 6 months. Things like vets, dentist, contact lenses, haircuts, children’s birthdays, Christmas, school trips, car servicing, Work out how much these would cost over a year and then divide this number by 12 to get a monthly allocation.

And then list out positive movements of cash into savings for the future you, be that immediate future or further into the future when you would like to be financially free (or not working!). Including here emergency savings, holiday savings, Stocks and Shares ISA savings, children’s savings, Pension contributions and mortgage overpayments.

Then you start adding in your numbers that you can transfer over from your spending diary. I have created a simple budget tool here. No need for you recreate yourself when you can use my simple model. The spreadsheet will add up everything for you and give you a balance at the bottom of your income (money in) less your expenses (money out).

How scary was that? I know it is maybe an hour or two of work, but well worth the time and the effort. Focus on the number at the bottom of your budget. Hopefully your income exceeds your expenses, if not then go read my debt section.


More to explore


Lynn Beattie

Aka Mrs MummyPenny

Personal Finance Expert

I write about personal finance made simple, lifestyle choices that will save you time and money, as well as products and services that offer great value.

Get the latest…subscribe to the newsletter for hundreds of money saving tips.

I wish to receive emails & promotions.

follow Mrs MummyPenny

5 Responses

  1. I am beginning my journey today, income and expenditure, it was quite daunting to start off with facing what I owe but im grateful it is worth it. I hope to turn this into a habit and be a successful at managing my money feom now on. Herw goes!

Leave a Reply

Your email address will not be published.