Money 101 · Module 1 of 6: Budget · Lesson 3 of 4 · 4 min read
Your first budget in 4 steps
Your first budget doesn't need a spreadsheet with fifty rows. Four steps are enough to give every euro a job and see whether the plan holds up.
The four steps
Use the numbers you collected when you tracked a month of spending. If you haven't done that yet, start with your bank statements from last month.
Write down your take-home pay. Use what actually reaches your account each month, not your salary before tax.
List your fixed costs. Rent, utilities, insurance, transport passes, minimum debt payments and the monthly share of yearly bills.
Set your saving amount first. Decide what moves to savings on payday, before any other spending happens.
Give the rest a weekly limit. Whatever is left covers groceries, eating out and everything flexible. Split it into a weekly amount so you can check it as you go.
A worked example
Say you take home €1,800 a month. Your fixed costs come to €1,050 and you decide to save €150 on payday. That leaves €600 for flexible spending (1,800 − 1,050 − 150 = 600).
A month is a little longer than four weeks, so the fair weekly figure is €600 × 12 ÷ 52, which is about €138. If you spend €120 one week, the €18 left over can roll into the next week or go to savings.
The plan balances when income minus everything you have planned comes to zero: 1,800 − 1,050 − 150 − 600 = 0. Every euro has a job.
Review after one month
At the end of the first month, compare the plan with what really happened. Expect to adjust it – a grocery limit that was too tight or a bill you forgot is normal, not a failure.
Change one or two numbers and run the plan for another month. A budget you keep using and adjusting is worth more than a perfect one you give up on.
Make it automatic
Set up a standing order that moves your saving amount to a separate account on payday, and pay fixed bills by direct debit where you can. Then the only number you need to watch during the month is your weekly limit.
You may find it easier to move the weekly amount to a separate card or account at the start of each week. When it is gone, flexible spending stops until the next week begins.
3 questions. Pick an answer to see why it's right or wrong.
In the four steps, when do you decide how much to save?
Not quite. Money left at the end of the month is often spent before it can be saved.
Not quite. The steps include saving from the start, alongside minimum debt payments.
Right. Setting saving first makes sure it happens instead of depending on leftovers.
Show the answer
Before flexible spending, on payday – Decide what moves to savings on payday, before any other spending happens.
Take-home pay is €1,800, fixed costs €1,050 and saving €150. How much is left for flexible spending?
Not quite. That takes the €150 saving out twice.
Not quite. That forgets to take out the €150 saving.
Right. 1,800 − 1,050 − 150 = 600.
Show the answer
€600 – That leaves €600 for flexible spending (1,800 − 1,050 − 150 = 600).
Your grocery limit turned out too tight in month one. What should you do?
Not quite. Look at the plan as a whole first – other flexible spending may be easier to trim.
Right. Small adjustments turn a first draft into a budget that fits your life.
Not quite. Needing to adjust a first budget is normal, not a sign it can't work.
Show the answer
Adjust one or two numbers and try another month – Change one or two numbers and run the plan for another month.
Saved only in this browser.
Last reviewed
Education, not advice. I'm not a financial adviser and I don't know your situation. These tools show the maths behind common rules of thumb; check important decisions with a qualified professional. Full disclaimer.
AdSense · Anchor ad (Auto ads)Mobile only · bottom of screen
