Budgeting & Why it Matters

Everyone should have a clear view of how money flows in and out of their life. No matter your level of income or net worth, consistent budgeting and monitoring of your income and expenditure is an important financial planning practice for everyone.

The concept and practice of budgeting should be viewed as a positive thing; it’s an essential tool to make sure your money is going in the right direction to support your financial priorities and goals.

In this article, we’re looking at how to track your spending habits in a useful and meaningful way to help you make confident decisions and put your money to work on the things that matter to you.

Particularly when your income isn’t a fixed salary, or you have more than one source of income, or when your lifestyle, responsibilities and plans are more complex than average, a basic budget won’t cut it. Understanding where your money goes each month and each year gives you more control and clarity.

Good Budgeting Helps You To:

• Know when to draw down versus investing
• Time large purchases tax-efficiently
• Avoid liquidity issues in retirement planning
• Keep lifestyle spending aligned with legacy goals
• Handle lump sum gifting with confidence

Where to Start

Decide what tools you’re going to use. This is personal preference. Some people like to use apps, websites or budgeting software. Manually inputting data into a spreadsheet can be tedious and time consuming but can also help you to become more mindful about spending and tracking. Use a shared Google Sheet or similar if you and your partner both need access and visibility.

Track Everything

Track all of your expenses and income. Often when we try to predict how much we will need to allocate to certain areas we are quite far off or overly optimistic with the amounts. It’s important to track actual spending to help you forecast how much you will need each month/year. See the suggested steps below.

Take the time to look at all income sources and bank statements going back at least three months and collate information, so you know exactly how much income you have and what your outgoings are each month are. Don’t forget to include cash.

This will help you to be realistic with your budgeting, help you to see where you are actually spending, including in areas you’d prefer not to, and track when costs or expenses are increasing. Continue to track spending each month so you can see how your spending compares to your budget, and you can adjust as needed.

If you’re using an excel or Google sheet, create a one-page cover sheet that displays only:

• Total monthly inflow
• Total fixed outgoings
• Available discretionary income
• Upcoming large expenses (next 6–12 months)

This allows you to look at things at a glance and can be less overwhelming.

Essential Budgeting Steps

Step 1 – Break down your income clearly & map all sources

Even if you ‘know’ what you earn, write it down in detail:

• Monthly salary or drawdown from your company
• Dividends or rental income
• Interest, bond or investment income
• Irregular inflows like bonuses, inheritance, tax refunds, asset sales
• Transfers from trusts or family structures

This helps you understand what’s consistent and what isn’t. Irregular income is often the source of budgeting stress, so flag anything unpredictable or seasonal.

Step 2 – Build a realistic baseline of outgoings

Use the past 3 to 6 months of bank and credit card data. Group it into broad categories that matter to you. The way that you group costs and outgoings is personal to everyone. A suggested outline is:

Category	Typically Includes
Housing	Mortgage, rent, insurance, maintenance, service charges
Essentials	Groceries, utilities, phone, transport, healthcare
Responsibilities	Family support, school fees, cleaner
Lifestyle	Subscriptions, holidays, memberships, dining out
Financial Commitments	Life cover, pensions, adviser fees, tax payments, sponsorship, charitable support

 

Don’t forget annual or semi-regular costs like:

• Property tax, accountant fees, annual travel, tax liabilities
• Insurance renewals – car, home, health, income protection
• Household upgrades or replacements – roof repairs, boiler, etc.

Step 3 – Identify your fixed, flexible, and future costs

Not all spending is equal.

Break it down something like this:

• Fixed – keep track and automate payments where possible
• Flexible – review quarterly, look for habit changes or drift
• Future/forecast – plan now, especially for anything above €2,000 like home renovations, new car, weddings, large gifts or donations. This lets you reduce surprise, spot creep in spending and make better choices over time.

Questions to Ask Yourself

Once your data is mapped, ask:

• Do my spending patterns reflect what actually matters to me?
• Am I putting enough aside for large known costs?
• Can I afford to fund any specific goals or plans that I have?
• Am I leaking money into areas that don’t add value?
• Could I simplify? (too many accounts, too many cards?)
• Is there a predictable pattern to irregular expenses I can plan around?
• Do I need to adjust how I save or invest based on upcoming big expenses?
• Who else is relying on me financially, and what might change in the next few years?

Build Your Budget

Once you’ve considered the above questions, build out a realistic and meaningful budget for the next twelve months. Make sure to build in a monthly buffer, especially when you first start off.

Keep an Emergency Fund

A solid cash reserve lets you respond to opportunities or emergencies without scrambling. We recommend that you hold enough to cover at least six months’ worth of essential outgoings in an easy to access account.

Tips for Keeping it Manageable

Review your spending quarterly, not just in January. Costs are increasing and budgets must be realistic to work. Try to take a monthly, quarterly and annual viewpoint when creating your budget. Don’t over-categorise, focus on which information is useful, not perfect. Talk to your Financial Adviser about how your budgeting links to tax, pensions and long-term goals. Automate payments and transfers as much as possible, especially to savings and sinking funds. Pension contributions should be made via payroll where possible to lessen tax return work at the end of each year. Schedule a quarterly review, like a board meeting for your household.

Common Budgeting Mistakes & Fixes

Mistake	How to Fix It
Forgetting irregular costs	Use a 12-month view, not just monthly
Underestimating lifestyle spending	Track 3–6 months honestly, including cash withdrawals
Not adjusting after life changes	Re-budget after major events (new home, illness, sale of assets)
Budgeting in isolation	Share plans with your partner or adviser for perspective
Focusing only on cutting back	Use budgeting to support meaningful spending and goals

Further Support

If you want to tie your cash flow planning into bigger decisions like:

• Retirement timing
• Supporting adult children
• Succession planning
• Working less
• Relocating or downsizing

It’s worth reviewing this with your adviser. Budgeting gives context to your financial planning review meetings.

Summary

Many people’s financial life is layered or unpredictable, a budget helps you to see the full picture more clearly. Budgeting gives you clarity, peace of mind and assists with better overall financial planning. It allows you to shape the way you live and plan for what’s next.