How to make a budget you will actually keep

1. Work out your real monthly income

Use take-home pay, after tax. If your income varies, use a low but realistic month rather than your best one.

2. List what is fixed

Rent or mortgage, utilities, insurance, loan payments, subscriptions. Take the amounts from your bank statements, not from memory.

3. Estimate what varies

Groceries, transport, going out, clothes. Look at the last two or three months of statements and use the average as your starting number.

4. Decide your savings first

If saving is whatever is left over, it is usually nothing. Choose an amount, even a small one, and treat it as a bill.

5. Make the numbers add up

Planned spending plus savings should equal income. If it does not, adjust the flexible categories, not the fixed ones.

Rules of thumb, with a warning

Splits such as 50% needs, 30% wants and 20% savings are a starting point only. In a high-rent city or with debt, needs may take far more. Use a split to check your plan, not to judge yourself.

6. Track and review

• Once a week, spend five minutes comparing actual spending to the plan.
• At month end, update the estimates that were wrong.
• Change the plan when life changes. A budget is not a contract.

Common reasons budgets fail

• Too many categories to maintain.
• No allowance for irregular costs such as gifts, repairs or annual fees.
• No small amount of fun money, which leads to giving up.