Save more this month: a challenge
Challenge yourself this month! This guide covers everything you need to start a budget and save more money, in three parts:
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Why budgeting isn’t a bad word.
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How to set up your first budget, with a real example.
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Habits and tools that help you succeed.
Part 1: Budgets are your friend
A budget takes into account how much you earn and how much you are able (or willing) to spend in a certain period. Many people see budgets as the enemy, but that’s not true.
A budget is a limit you don’t want to go over when you spend your money.
Budgets can have a big positive impact on your life:
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Budgets guide your decisions. It is much easier to see the big picture and make good choices when you divide your money into smaller pieces.
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Budgets support intentional spending. Life on a budget doesn’t have to be boring. You can budget for the things that bring you joy and cut the expenses that only drain you and your wallet.
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Budgets help you live your best life. They help you reach your goals. The money you save now can fund investments or your own business later.
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Budgets respect your hard work. They give every dollar a purpose, so your effort doesn’t go to waste.
Part 2: Start a budget
Don’t give yourself a headache over which “method” to choose. It matters less than you think.
“The best way to stick to a budget is to start one.”
We all have different incomes, spending habits and debts, and we live in different parts of the world. That is why there is no single correct way. You just need to start. It might not be perfect at first, and that’s fine. Don’t be hard on yourself. You will learn as you go and can adjust along the way.
The 50/30/20 rule
First, get familiar with the 50/30/20 rule, which splits your take-home pay into three parts:
- 50% essentials: at most half of your income goes to living expenses, your “needs”. This includes rent or mortgage, minimum debt payments, utilities, groceries and transportation.
- 30% personal: the most flexible part, for things that are not essential but make life better, such as entertainment, travel, pets, a gym membership, dining out and hobbies.
- 20% savings: put at least 20% of your take-home pay toward savings goals, an emergency fund or investments.
To see the split for your own income, try our 50/30/20 budget calculator. If you only know your gross salary, the salary calculator works out your take-home pay first.
Pay yourself first
The main goal of budgeting is to save as much as you can, right? That is why many people start each month by paying themselves first: they put a set percentage of their income aside right after it arrives. If you are paid irregularly, you can do it every time money comes in. If 20% feels like too much, start lower. What matters is starting and improving.
Where should the money go? In short: build an emergency fund you can reach easily, worth 3 to 6 months of your average expenses. Pay off your debts. Then grow your money through investing and keep learning. Our savings calculator shows how fast regular saving adds up.
Choose a time period
Expenses can be fixed or variable. Fixed expenses are the same amount every period (rent, utilities, insurance, subscriptions) and are usually harder to change. Variable expenses change from month to month (food, shopping, gifts, travel and so on). Set each budget’s length to match the type of expense. Common time frames are:
- daily,
- weekly,
- every two weeks,
- monthly,
- yearly,
- a custom period.
In this guide we combine a monthly budget with a weekly one.
Choose the size of your budget
Let’s learn through an example. Simon lives in Europe and takes home 1,800 EUR a month. He wants to start saving, so he follows the 50/30/20 rule and pays himself first: 20% of his income, or 360 EUR, goes straight to savings.
What does he do with the remaining 80%? He decides to spend it wisely, with a few budgets.
First, he sets a monthly total budget for the remaining 80%, which is 1,440 EUR, to cover all his expenses.
Next, he looks at his most variable spending and realizes he spends far too much on food. Food is more than one category for him: Groceries, Eating Out and Drinks. So he gives food its own budget and tracks it weekly.
A common guideline is to spend 10% to 15% of your take-home pay on food. Simon picks 15%: 270 EUR a month, or 67.50 EUR a week.
Stick to the budget
Simon shops carefully and follows our 20 tips to save money on groceries. He checks his food budget during the week to see how much he has left. On the last day of the week, he has spent 48.50 EUR, which is 19 EUR under his limit.
First week done!
Real results
After a month of following his monthly budget and his weekly food budget, Simon has saved an extra 212 EUR: 72 EUR on food and 140 EUR in other categories.
If he keeps it up all year, that is roughly 2,500 EUR extra. Add the 20% he pays himself first, 4,320 EUR a year, and he saves about 6,820 EUR a year. That is enough for a nice family vacation, with a good chunk left over for savings and investing.
Part 3: Habits for financial success
You have set up your first budget. Now it is up to you to build the habits that support it. Here is what helps, with examples of how it works in Spendee.
Connect your bank accounts
See all your money in one place. When you connect your bank, card payments come in automatically and are sorted into categories, so you don’t have to type them in. Spendee supports over 9,000 banks around the world.
Make tracking a habit
Update your finances regularly. If you don’t connect a bank and prefer to track by hand, add each expense right after you pay. It only takes a few seconds, and you can snap a photo of the receipt with “Scan receipt” to fill in the details.
Set up recurring transactions
Tracking by hand? Do you have expenses you pay every month, like rent, internet or insurance? Add them once and set them to repeat. In Spendee, you set the frequency with the Repeat option when you add the transaction.
Tip: Schedule every payment you know is coming. A gym membership renewal, a haircut, a new public transport pass. That way you stay organized and no last-minute expense catches you off guard.
Look ahead with scheduled payments
Scheduled income and expenses for the current period show up in your charts and in their own Scheduled section. That way you can see what is still coming this month, not only what you have already spent.
Stay motivated and watch your money grow
One of the biggest benefits of tracking is seeing all your money in one place. Keep cash, bank accounts and savings in separate wallets, and if your budgeting is working, you will see your total balance grow over time.
Keep your categories simple
You can rename and reorganize categories to suit you. We recommend a small number of clear categories, because simplicity is powerful. If you want more detail, use labels.
Use labels for extra detail
Labels are tags that work independently of categories and add more detail to a transaction. For example, you can label each purchase as a need or a want. Here is another idea:
That dinner you just had falls into the Food & Drink category. But it was also a “Dinner”, more specifically “Pizza”, on a “Date”, during your trip to “Italy”, paid by “Card”. Labels let you capture all of that, and later you can see how much you spent on, say, dates or that trip.