How to budget: a simple plan that works

1. Track one month of spending

Download your bank and card statements for the last month or two and sort every payment into a category. Most people are surprised by food, delivery, subscriptions and small purchases. Do not judge yet; just get the real numbers.

2. Build the budget

Enter your take-home income and your categories in the calculator. Mark each as a need, a want or saving, and compare with 50/30/20. Include irregular costs such as gifts, car repairs and yearly subscriptions by dividing them by 12.

3. Pay yourself first

Set up an automatic transfer to savings on payday, before you spend anything else. Even 5% is a good start; raise it each time your pay goes up. Saving what is left at the end of the month rarely works.

4. Build a safety net, then clear expensive debt

First save a starter emergency fund of one month of expenses. Then pay off high-interest debt such as credit cards, highest rate first. After that, grow your emergency fund to 3 to 6 months and start investing for the long term.

5. Review every month

Spend 15 minutes at the start of each month comparing what you planned with what you spent, and adjust. Track your net worth every 6 or 12 months to see the bigger picture.

• Use take-home pay, not salary before tax.
• Turn yearly costs into monthly amounts.
• Automate savings on payday.
• Cut wants before needs.
• Review monthly; check net worth twice a year.