Some of the most common questions asked at /r/ukpersonalfinance relate to budgeting. We have tried to create the following FAQ to help:

Creating a Budget

  • To create a budget, list your fixed expenses (rent/mortgage, basic utilities, car payment, debt repayments, food, etc) and discretionary spending (eating out, entertainment, clothing, etc).
  • Don’t forget to include “one-offs” and annual payments. Car MOT, house insurance, Christmas presents, and so on. It can be useful to convert the annual costs into a monthly bill for budgeting purposes.
  • Compare your costs with your monthly take-home pay (your pay after taxes and deductions are taken out).
  • Religiously track your spending until you have a good idea what each spending category costs you each month, then work to reduce these expenses.
  • Discretionary costs are far easier to reduce than fixed costs. Reducing how often you eat out or splurge on the local high street is lower hanging fruit than reducing your rent or mortgage. That said, many people significantly overpay on their household bills, and a review of gas/electricity/home phone/broadband/mobile phone/banking can yield significant savings.
  • Figure out a tool/system that works for you. There’s a list below.

Setting Budget Goals

  • While frugality has its benefits, and discretion is always a virtue, going overboard with the belt-tightening can increase the likelihood of relapse. Set goals for each spending category, but make sure your goals are SMART –
  • Specific – Ensure you are stating specific goals. Example: “I will cut my restaurant budget by 25% this month.”
  • Measurable – You need to have a way to measure if you succeeded or failed. With money, this is usually pretty easy. The example above is measurable – if you spent £100 on restaurants this month, you’ve succeeded if you spend £75 or less next month.
  • Achievable – If you decide “I will stop spending on restaurants entirely next month” when you have three family birthday meals to attend, things are not likely to go well. Make the goal achievable instead: “I will aim to reduce my restaurant spend by 25% next month”.
  • Relevant – This may seem obvious, but if you’re setting budgeting goals don’t get off-track. Reducing your spending on lunches at work may be relevant, but deciding you will make these lunches more healthy belongs in a fitness SMART goal, not budgeting.
  • Time-bound – Hold yourself accountable by setting a deadline. Goals with fluctuating or indefinite time frames don’t help you.
  • Make sure you reward yourself when you achieve your goals, then set another goal for the next month.

The Envelope System

YNAB and other software effectively digitises the following process, but it is entirely possible to manage it manually with envelopes or jars or piggy banks:

  • Once you have your budget in place using the envelope system can be a good way to stick to your budget. Decide what spending categories you want to try to control using the envelope system. Typically any area where you overspend is a good one to use. For many people this might be food, clothing, and entertainment. For each of those categories go to the bank or ATM and withdraw your budgeted amount in cash. Take an envelope and write the name of the category on the front of the envelope and put the money inside.
  • From then on, whenever you spend money in this category it must come from that envelope. If you don’t use the money for that month leave it in there and add your budgeted amount again next month. If you are consistently not spending the money maybe you want to adjust your budget. Some things you just don’t buy every month though. People tend to buy clothes seasonally, for example.
  • The advantage of the envelope system is it makes you stop and think. If you’re at the store and want to buy something, you look in the envelope. If the envelope is empty you know that buying that item would put you over budget.
  • On the other hand, if you’re half way through the month and have spent more than half your food money it may not be a good idea to go out to eat that night. Is that toy really worth half of your entertainment budget for the month?
  • It can also help those that have a hard time spending money. If you open the food envelope and there is more than enough money for the rest of the month, you can feel better about going out with your friends.

Budgeting Tools

Open Banking

The American population gets Mint, a widely accepted and supported cross-platform budget aggregator. Unfortunately in the UK this approach has not been as widely received.

The introduction of open banking is seeing more account aggregation/budgeting software appear. The long-time stalwart is MoneyDashboard, although many banks are incorporating the facility into their apps (see: Barclays, RBS, Lloyds, Monzo, Starling). It is not recommended to give an account aggregator your login credentials, instead with a regulated service you’ll authorise access via your bank. You can also withdraw permission via your bank too.

Purpose-built Software

YNAB is commonly recommended. It’s a subscription service at ~$84 PA, and web-based, but doesn’t link with UK banks so some amount of manual importing is required. The requisite warnings about giving your banking data to a cloud-based third party aside, it’s decent budgeting software.

Alternatives that offer something similar:

  • Financier.io – An open-source, web-based clone of YNAB Classic (formerly YNAB 4). Free to use with no syncing, small monthly cost to have synced data.
  • Good Budget – Online envelope budgetting software. Free for 10 regular “envelopes”, pay for more.


User-created spreadsheets can be adapted from /r/personalfinance’s tools wiki page.

Moneysavingexpert’s Budget Planner has a fantastic downloadable spreadsheet which is preconfigured and UK-specific.