How to set a budget

[DailyEnergyCrisis]

I’m hoping to spend less on extras this year which I guess is mainly clothes I don’t need, fancier food than we need, things the kids don’t really need. What’s the best/easiest way to set a budget and track spend? Or do I need to go cold turkey and only buy food and essential kids clothes.

Fair enough about paying for YNAB, lots of people feel the same, but it really is helpful as a mindset and priorities tool (and a wealth tool) in a way a spreadsheet isn’t, imo.

I agree @flowerycurtain
I went from a balance of £10-£20 by the end of each month to nothing less than £3k using YNAB
Didn't believe it was possible and it was uncomfortable for the first few months but if you persevere and push through, it really does work and has bought me so much peace of mind.

I'd also second the idea that YNAB is worth the money. I save way more each month by using it than it costs me.

I also use it to track my net wealth and keep an eye on pensions, Isa's etc. the app is so much more useful than a spreadsheet as the second I've spent something I can input it.

Depends if OP is disciplined enough to do this. Some people would see the £100 as there to be spent, so would spend it regardless of whether there was something particular they wanted to do.

It might be more useful to say that in an average month, you'll spend £20 on each of 2 days out, but have £50 for an extra day out at Christmas and £100 for days out in the summer holidays on top. (I've just made up some numbers; but if you have actual days out in mind, you can assign more accurate values).

YNAB is perfect - we had a similar situation, seemingly plenty incoming, nothing horrendously obvious outgoing but always running out by the end of the month.

I've been using it religiously for 8 months and it's changed my habits completely.

£100 on kids clothes out of £6k income feels like nothing so it's easy to overlook. However, £100 out of a monthly budget of £80 for clothes really does focus the mind!!!

The time 'cost' it takes to manage a spreadsheet properly is easily considerably more than the £80 a year fee. Honestly, it's so easy, it pulls all the activity from bank cards / credit cards / any kind of spending automatically into the app. It takes a couple of minutes a day to 'assign' every transaction and keep on top of it.

A spreadsheet vs several online accounts would be a very different activity and much much more likely to fail as it's so much more complicated.

I think I’m sold on trialling YNAB. I’m slightly nervous of how horrified I’ll be at my spending habits but ultimately if we save money for either the health or renovation fund it’ll be worth it.

Thanks to everyone for the advice and insight- it’s been really helpful.

@DailyEnergyCrisis
For me the 30 day free trial wasn't long enough to fully convince me so I didn't sign up immediately. They then offered me a further free month, after which I was completely sold! Good luck, I hope it works as well for you as it has for me. Happy New Year!

Another vote for YNAB. We’ve been using it 10 years; worth every penny and helped us through periods of no earnings without panicking. I don’t know how people live without it. It definitely makes you notice all the small things. I divide my budget up into non-discretionary (mortgage bills transport), groceries, and discretionary. Lots of subcategories in there. At the moment we are fully funded until the end of May apart from days out, meals out, and summer holidays. We aim for 6 months fully funded (we are both self employed) but rarely get there; overall though massively reduces stress.

Can you use YNAB for a few different accounts? Ie. My sole acct, dh sole acct and the joint acct?

You can set up as many accounts on it as you want.

I have the joint account, savings accounts, credit cards etc.

I don’t have my DH’s personal account on it, or mine, as we use those just for purely discretionary personal spending so I don’t need or want to track or manage that.

If you have a Google account (you can set one up for free) you can use the budget template on Google Sheets to make a budget.

It has preset categories for expenditure or you can adapt them for yourself, and you put in the planned cost for each month do the year.

So for example we've budgeted for friends and family birthdays in different months, haircuts however often you need them, as well as bills which might be the same each month. We also save each month for holidays, Christmas and rainy days.

Then we have a Monzo account with "pots" for all the different types of spending like groceries, bills, gifts. We have standing orders set up each month after we get paid to put the required amount of money in each pot.

It means we're not short on months when expenditure is higher like Christmas, birthdays or MOTs, because we save for it throughout the year.

Yes! We have 3 joint accounts. I like to keep them separate, so I make a main budget category for each account, then subcategorise within them. Technically with YNAB, there is no need to have separate accounts, but I like to keep them.

YNAB is so flexible. I have a category for 'direct debits first half of month' and then all DDs subcategoried under it, then 'direct debits second half of month'. That means that at the start of the month, I just select that category, which selects all the subcategories, then click 'amount spent last month' and it allocates the right amount of money to each of them. Then I know how much money we have remaining until we get our next money in the middle of the month.

It means that when, say, our rent money goes out, I don't feel like I've spent money and it's a big drop in the account because it was already 'gone' in YNAB from the moment DH got paid.

Forgot to say that having the app on our phones is brilliant, too. DH and I both put any spending into YNAB immediately, so we have a complete picture of our budget all the time.

The best thing I’ve done recently is to meal plan. I sit down every Saturday morning, plan all the meals for the next 7 days then create a shopping list for all the meals after checking my fridge / cupboards / freezer. The menu plan lives on the fridge so we both know what’s for dinner that day! I’ve saved a fortune and massively reduced my food waste.

It seems against the idea of budgeting to have to pay for a budgeting app! How much is it a month? I find it hard to tell.

I don't understand how people are saying it saves them money.

Whatever changes they are making to their behaviour to buy less or get things cheaper could be made without YNAB, so for it to actually save money it would have to generate money out of thin air on top of the savings to cover the cost of the app.

I'm interested in the benefits of doing it this way please? At the moment, I have a big 'emergency' pot and also longer term savings in investments / ISAs which is obviously a hangover from having a 'savings' account. This is the 2nd time I've seen recently about allocating into future months so I'm considering it..

I allocate monthly into annual bills now rather than dipping into savings for that. And also monthly to build holiday pots.

What are the advantages for you to allocating all the money into future months rather than a general emergencies pot?

I think in our situation if shit hit the fan we'd take from investment pot to cover expenses but it's earning more for us there at the moment

Wrong in my experience.

I needed the app to make it easy enough to track spending.

Without it, I didn't have the time or brain space to sit down and log in to all the different accounts on different windows on laptop (phone logs out every time I switch away) to reconcile / allocate spending.

Without THAT I had no motivation to do anything about it.

Why does anyone track anything?? Need to lose weight? Just making healthy choices is no where near as effective as calorie counting as you're working with incorrect information most of the time.

I thought we shopped in Aldi. How wrong I was 🤣. We were shopping twice monthly in Aldi but spending the same again in much more expensive top up shops.

So now I've fixed us to £50 top ups and I can keep an eye (using phone for 10 mins which would otherwise be dead time / doom scrolling) on if we're getting lazy and boot us back into Aldi.

I don't get this either. It reminds me of "Secret confessions of a shopaholic" where Becky "invests" in stuff to save money later.

If you're trying to save money, the best way to do it is not to spend any. That means questioning yourself every time you buy anything as to whether your purchase is essential, whether you will get value out of it and whether you can achieve the same result more quickly.

knowing you spend £100 a year on family presents doesn't tell you whether you can cut down or not.

I thought we shopped in Aldi. How wrong I was 🤣. We were shopping twice monthly in Aldi but spending the same again in much more expensive top up shops.

You see, I don't understand how someone would not realise that they went to Aldi twice a month and other shops for top-ups.

I think if you're starting to budget, it's useful to work out where your money is going by going back through previous bank statements and receipts.
But this is a one off job. Surely once you've worked out that you spend a lot on top-ups in expensive shops, you don't need an app to keep track of this? You simply stop going to them?

OK, sod this. Thought I'd give it a go. Linked my accts. Now it's booted me out of my banking app and I can't get back in 😣I'm going to delete the whole app and re install the banking one. Not at all happy with that.

There must be a simple spreadsheet solution for this.

I don't understand that, @Justkoko . YNAB uses Truelayer to link your account. You aren't doing anything other than telling your banking app that YNAB is allowed to look at your account.

Yes, a spreadsheet can do what YNAB does. YNAB is just a glorified spreadsheet. But for me, the value comes in my accounts being synced; my budget being accessible from my phone, the PC, & DH's phone. The YNAB method is key, but they are completely open about it so you can use the method without the app.

This is totally random and may or may not be helpful but I got rid of Amazon prime to stop my impulse easy spends. It worked as I was easily spending £100 to £200 a month and now I have to pay for delivery I just won’t buy items. It was generally impulse spending but I actually also found a lot of places were cheaper than Amazon to begun with. For example the entertainer toy shop has the same toys the dcs wanted for Christmas as Amazon but we’re about £5 to £10 cheaper each on average.

People are different - some people need accountability and I am one of them and YNAB is perfect for me and my family.