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How can I budget effectively? – U Account – Medium

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Budgeting is a super-important life skill, but not one that comes easy. Keeping track of your funds — what you’re spending, where your money’s going, and what you’re bringing in — can be tricky.

But there are some ways to help make the whole thing smoother. We at U Account have a few free tools that you can use to stay on top of your finances, plus we’ve got some other great tips to help you budget like a pro.

The basics

One of the first steps towards budgeting effectively is to get the basics right. How much money are you bringing into your account every week, or every month? Does it come from multiple sources? What specific day does the money enter your account?

Getting a handle on the facts of your incomings is vital for when you’re starting to budget. Until you know how much money you’ll have at your disposal, it’ll be almost impossible to keep on top of your outgoings.

If you’re in paid employment, make sure you’re accounting for any taxes to your wages when reviewing your earnings. Remember, it’s the net pay (or “take-home” pay) that’s the final amount that will go into your account — not your gross pay. For more info on taxes, HMRC’s website has some great explainers on the different kinds, and how they work.

Take care of the essentials

Broadly speaking, when it comes to spending money, there are two types of things: those that we want, and those that we need.

Seeing as budgeting is all about taking care of the things you can’t do without, it’s important to work out what those essentials are. Your rent or mortgage belong on this list, along with utilities like electricity and water. Also make sure to consider any other financial commitments you might have, like loans that you might be re-paying over time. Check not only how much these payments go out, but also the exact days in which they leave your account.

Your food bill can be harder to estimate, as you may be buying different items each week. Keep hold of your receipts and try to work out a rough average of how much you spend every time you shop, and that will give you a figure to work with as part of your budgeting.

Okay, now what?

You now have all the facts you need to help you start budgeting — what goes out, what comes in, when, and how much. This should give you a good starting point to helping you set aside enough money each month to pay for your essentials, hopefully with a little left over that you can put aside.

Knowing your budget is just the first step, though — now it’s down to you to manage it. At U Account, we have a few things that can help you along the way — one of which is our Extra Accounts feature.

Stay organised with Extra Accounts

Extra Accounts make it easier for you to set aside the money that you need to cover your outgoings. For example, you could create an Extra Account purely to pay your rent and bills, and make sure that you set aside enough cash in that account each month for those.

Think of it like a series of pots into which to sort your money. Extra Accounts each come with their own unique account numbers and sort codes, and help you get organised and keep your different funds separate. You can create as many Extra Accounts as you need with U Account, but each monthly payment option includes a different number of free Extra Accounts — check our pricing page for more details.

Free budgeting tools

We also offer a couple of other free tools that are great, easy ways to help you build up a bit of a buffer for your budget.

Firstly, our 365 Budgeting feature is a great way of gradually growing a nice stash of cash outside of your regular budget. It’s incredibly simple: by activating this feature in your account, it takes a penny from your main account on day one, and puts it in a new account. On day two, it takes 2p, on day three, 3p, and so on. Over the course of a full year, you’ll set aside £667.95! It’s a brilliant tool if you need to save up for something big in the future, or just want to have a nice buffer of cash for emergencies.

You can even stop it at any point — 100 days works out as £50 saved, where 6 months is over £150.

One other U Account tool that you should know about is our Overdraft Buffer. This does exactly what it says: helping you create an emergency pot of cash in case you find yourself a bit short at the end of the month and need a little extra money to cover your bills.

It works like 365 Budgeting, but Overdraft Buffer takes £1 from your main account every day and puts it to one side, giving you up to £31 per month for those situations where you need it most. It’s a small amount per day, but £30 can make all the difference when it comes to paying those bills.

Both of these tools are automated, meaning U Account takes care of them for you — all you need to do is activate them in your account, which takes just a few clicks.

To find out more about our free budgeting tools, check out this blog post.

Summary

Budgeting is one of those things that’s both complicated and straightforward at the same time. Tools like the ones U Account offer can help you take your budgeting to the next level, and make sure you’re always in the black. But the most important thing is to get the basics right, and get a firm grip on your finances. If you can do that, then you’ve given yourself a great platform from which to not only pay your bills, but also build up a little bit of savings for a rainy day.

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