Put simply, a living budget is the amount of money you need to get by each month, based on your income and spending patterns. Working it out can be really helpful for anyone starting out on their savings journey, so you can set a budget that’s realistic for your lifestyle.
Ready to get going? Here’s how to work out your current cost of living:
1. Work out what you have to play with
First off, you’ll need to know what comes in each month and what goes out. Being really precise about your spending is a pain, but it’s a great way to see a clear picture of your everyday costs.
Here are few things to take into account:
• Rent or mortgage payments
• Utility bills – gas, electric, water, internet, TV, council tax, mobile phones
• Loans and credit cards
• Food and essentials
• Car costs
Need to work out your household budget for the whole family? Check out our guide to working out your family budget.
2. Monitor your spending for a month
Now it’s time to get a handle on unplanned outgoings – this can be a little more slippery.
So-called ‘spontaneous spending’ includes everything from your morning coffee, to that cheeky pay-day takeaway. Plotting this all out over a month can help you work out your average spending, so you can set a realistic budget and stick to it.
3. Factor in those one-off costs
When it comes to budgeting, it pays to think about the long term. A sustainable budget shouldn’t just consider your daily expenses, but should account for any one-off costs, such a new boiler or a big birthday or anniversary.
Looking back at your last years’ finances can be a good way to figure out these expenses. Then, once you’ve got all these in one place, you can average out the costs.
Top tip: As well being a great way to budget, this is an excellent way to save – anything left over at the end of each week (or month) can go straight into your savings. You can even boost your rainy-day fund by automatically popping those excess pennies into your Yolt Money Jar.
4. Put your living budget into a savings app
So you’ve got all your outgoings laid out before you. Now you just need to decide whether to budget by week or by month, depending on how you want to do it, and divide your total spend by 12 or 52 accordingly.
If you’re new to budgeting, or just need a little reminder here and there, the budgeting feature in the Yolt app can help you can see everything at a glance, with handy notifications to keep you on track.
Are you struggling to put the pennies away? Check out our step-by-step guide to help you save money on a budget.