How to Set Up a Monthly Budget (That Actually Works!)
Struggling to figure out where your money goes each month? You’re not alone. In fact, a recent Money and Pensions Service study found that over 11 million UK adults have less than £100 in savings. Yet, budgeting remains one of the most overlooked financial habits—despite being one of the most powerful tools for gaining control over your money.
Whether you’re saving for a holiday, clearing debt, or just trying to make your paycheck stretch a bit further, setting up a monthly budget is your first real step toward financial freedom. Let’s break it down—no jargon, just real talk.
Why Budgeting Matters More Than Ever in 2025
With the cost of living crisis still affecting households across the UK, budgeting has become more important than ever. According to the Office for National Statistics (ONS), household bills rose nearly 20% over the last two years, while average wage growth hasn’t kept pace.
Despite that, budgeting can reduce money stress, help you build better habits, and make space for what really matters—whether that’s your family, your future, or a cheeky weekend break in Cornwall.
Step-by-Step Guide to Creating a Monthly Budget
1. Know Your Numbers
Before you do anything else, figure out:
Total income: Your salary after tax, side hustle money, benefits—everything.
Fixed expenses: Rent/mortgage, utilities, council tax, subscriptions, debt repayments.
Variable expenses: Groceries, petrol, social outings, kids’ clubs, etc.
💡 Tip: Go through your last 2–3 months of bank statements to get the full picture. You’ll be surprised how much those "quick Tesco runs" add up.
2. Choose a Budgeting Method
Pick a system that suits your lifestyle. A few popular options in the UK include:
50/30/20 Rule:
50% on needs (rent, bills)
30% on wants (gym, Netflix, takeaways)
20% on savings or debt repayment
Zero-based budgeting:
Every pound has a job. Your income minus expenses should equal zero (but in a good way!).Envelope method (digital version):
Virtually “assign” spending categories a set amount and don’t overspend.
3. Track and Tweak
No budget is perfect from the start. You’ll likely overspend in one area and underspend in another. That’s normal.
Use tools like Google Sheets, a budgeting journal, or your bank’s transaction categorisation features to track spending weekly. Then adjust monthly. The goal is progress, not perfection.
4. Plan for Surprises
Life throws curveballs—boiler breakdowns, birthday gifts, unexpected school trips.
Set aside a small buffer fund (even £20–£50 per month) to cover surprise costs and avoid dipping into credit.
5. Include Fun Money
A budget isn’t a punishment—it’s permission to spend intentionally. Give yourself a “fun” allowance. It could be coffee with friends, that new Zara jacket, or your Friday night curry. This helps reduce guilt and makes budgeting sustainable.
Common Budgeting Mistakes to Avoid
🚫 Ignoring irregular expenses like MOTs, Christmas, or annual insurance bills
🚫 Not budgeting for you—copying someone else’s plan
🚫 Giving up after one “bad” month (consistency wins!)
UK Budgeting Trends in 2025
Digital-first habits: Nearly 60% of Brits now use online banking to monitor their spending weekly.
Younger people lead the charge: Gen Z and Millennials are 2x more likely to budget monthly than Boomers.
Savings revival: Despite financial pressures, over 40% of people aim to build an emergency fund this year (Source: Yorkshire Building Society).
A Final Word: Budgeting is a Form of Self-Care
Budgeting isn't about restriction—it's about freedom. When you know where your money goes, you’re in control. You can say yes to the things that truly matter and confidently say no to what doesn’t serve your goals.
Start small. Stick with it. And remember—you’re not doing this alone. Let’s build a future where managing money feels less like a chore and more like a power move.
Important Disclaimer: The information provided in this article is for general informational and educational purposes only, and does not constitute financial advice. Everyone's financial situation is unique, and what may be appropriate for one person may not be for another. We strongly recommend that you seek personalised advice from a qualified and FCA (Financial Conduct Authority) approved financial adviser before making any financial decisions or taking any action based on the content of this article.
Book Your Free Financial Advice Call Today
Take the first step toward financial clarity—speak with an adviser now.
