How to Build a Budget

26th May 2018
learn to build a budget

So I skimmed through my old post about budgeting. And while I’m a little bit intrigued by how my writing hasn’t really changed after over a year, there are some things I like to talk about and add on. Particularly, what it takes to build a budget! I’m always looking for quick solutions to start with; no one needs in depth economics right off the bat! Well, that’s of course unless you’re into that sort of thing.

How to quickly build a budget?

Come on, let’s just cut to the chase. Honestly, to build a budget you can simply use a:

  • Pen and paper
  • Phone note app

This is specifically to note down, plan and allocate!

Then what?

1. How much do you earn?

There’s no point to build a budget if you don’t have the funds to budget with. It can be your salary or even how much of your savings you’d like to use every month.

Example for using savings is in the case of retirement or sudden retrenchment. E.g. you have $12,000 saved up and need to survive for 2 years? That’s $500 a month you need to allocate.

2. Split your priorities into percentages

If you’ve been reading my posts so far, you’ll know I love using percentages. Similarly you got 100% of your money and you’ll need to split and allocate them to your needs.

In my previous post, I said the rule of thumb was:

  • Necessities (food, petrol, bills) – 65%
  • Short term savings (car purchase, vacation) – 10%
  • Long term savings (house purchase, kid’s education) – 10%
  • Leisure (shopping, movies, eating out, gym) – 10%
  • Charity or goodwill – 5%

Priorities are different for everyone. For example, some people want more for leisure so they have 60% necessities and 15% leisure. Think about what’s important to you and play around with the numbers.

3. Test run and monitor

You got your lovely budget now! So what do you do? Stick it on the fridge and hope for the best? Hells naw!

You start taking notes of what you spend and how much is spent! When you are nearing your limit, e.g. if your leisure budget is $100 and you’ve spent $100, it’s time to be more disciplined and say no to further spendings that month. Then review what is it that you spent and see if you can cut any unnecessary spendings next time.

I personally use a Spending Tracker app for this and tally up with my budget at the end of the month.

4. That’s it!

Honestly, that really is it! To build a budget is simple, but to follow, monitor and adjust or adapt is the challenge. Good luck!

Story time: Do I really need to build a budget?

Let’s look at it this way: you’re on a budget whether you like it or not! The only difference between building one versus riding the waves is simple: conscious choice. If you make the choice to build a budget, you’re saying “OK, I’ve had enough of not knowing where my money goes”. I’ll recount both sides of this financial coin for you since I’ve pretty much tried both “strategies” now!

“Good Ol’ days” without a solid budget

When I was a university student, I was fortunate enough to be a government scholar. This meant that, most importantly for me, I had a monthly allowance to survive. I was awarded £520-ish if I remember correctly. But as a strapping youngster out of A’Levels and going to Uni, I was unfamiliar of the responsibilities ahead. So I booked an on-campus accommodation because I didn’t want to deal with bills while I settle in, needed internet off the bat and wanted an en suite bathroom. En Suite (pronounced “on sweet”) means the bathroom is linked to your room and not shared. You could imagine the luxury this dumbfounded student lived!

Of course, there’s a price to pay! The rent was £498! This left me with £20 for… everything else. Which was mainly food… For a month. I remember thinking to myself “eh, it’ll be fine” and bootstrapped myself for a lot of £2 for 5 frozen meals! In hindsight, I’m still amazed at how I survived and came back during the summer 10kgs lighter (also due to joining fitness clubs).

My saviour was (simply by luck) the government decided to review the allowances and increase it when the year was nearly over! For the second year, I rented out a house with 3 other friends for much cheaper so I had more breathing (or rather, eating) room after that. Lesson learned!

Life on a budget

With a bit of reflecting, I decided (after graduation) that I needed to be better with my money. I swore to never let my account go to red or negative and still have a significant phobia of it! Coming into the real world and “adulting” with the others is a culture shock to say the least. Suddenly there were more responsibilities, things that I wanted to help pay for (otherwise I felt like a leech) and all the freedom as a student was overturned in an instant!

Regardless, one day I saw a friend use a spending tracker app on his phone and learned from him. And the rest, as they say, was history! I’ve been noting down all my spendings ever since. Nowadays, I can check the app to see how much I’ve spent for the month. There are times I go over budget. But because I got some money put away for emergencies, and more importantly: I don’t always go over, it has never been a big issue.

Hindsight is 20-20

So what was the difference between the budget during student life and graduate life? Well, for one I wasn’t making a choice to split my money into what I needed and wanted. For instance, my thoughts during first year uni was simply, “Oh, I need a place to stay” which lead to “Oh crap, I have to make due with what’s left.” The kicker here is that it didn’t feel wrong. In my mind, I was still spending money I had and that was fine. Fortunately, I was never really worried about money (except a few occasions, but that’s a story for another time). And I didn’t want my parents to send me money either; I felt they could use it better for the family rather than me. I guess that was the smartest financial choice I made back then!

How about now? Life on a budget to me is less stressful and suffocating than I would have thought back then. It’s on autopilot, I know I have x amount left and can do anything I want with it. There’s a shortfall for short term budgeting though: and that’s spendings that don’t occur every month such as car servicing or changing tyres or anything unexpected. The best way I deal with that is to give myself some buffer and of course, the emergency fund.


When we build a budget, we make a conscious choice to be smarter with where our money should go. It’s laughably simple to build too! That’s because even without a solid, written down budget, we’re still forced into one; by our paycheck. The real challenge is to build discipline and limit splurging plus, more importantly, adaptability. This means you need to play around with the percentages to find the sweet spot for your lifestyle and commitments.

How do you find budgeting? Are there any challenges you’d like to share? Do let me know!

A budget tells us what we can’t afford, but it doesn’t keep us from buying it.

– William Feather

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