A budget is not a list of things you are not allowed to do. It is simply knowing where your money is going before it leaves your account. This guide gives you a simple starting point if you have never made a real budget.
Start with what you already know
Before any maths, gather three numbers from last month:
- How much came in (salary and other regular income).
- How much was fixed (home, insurance, subscriptions, loan payments).
- How much was variable (shopping, eating out, leisure, surprises).
You do not need perfect precision on the first try. You need a baseline to compare with next month.
Separate fixed costs from variable costs
The distinction matters because each type needs a different strategy. A fixed cost rarely changes from one month to the next; a variable cost is usually where you have the most room to adjust.
| Type | Examples | What to do |
|---|---|---|
| Fixed | Rent, insurance, subscriptions | Review once a year, not month by month |
| Variable | Shopping, leisure, restaurants | Set a monthly limit and track it |
One common way to split your budget
A widely used approach (not a mandatory rule, just a starting point many people find easy to remember) is to split your income into three broad groups: essential needs, variable spending by choice, and savings or debt repayment. The exact proportions depend on your situation: rent in an expensive city, the number of people in your household, or ongoing debts will weigh more on one group than another.
The goal is not to get the perfect proportion in the first month. It is to have the three groups visible, so you decide with information instead of surprise.
Set limits you can keep
A limit that is too tight fails within two weeks and discourages you. It works better to start from values close to what you already spend, and adjust gradually month by month, than to impose a drastic cut that does not survive the first surprise.
In IOWII, you can set a monthly limit per category and watch your progress through the month, without keeping a separate spreadsheet up to date by hand. If you prefer a step-by-step guide, read how to set limits in IOWII.
Review your budget every month
A budget is not a static document. Review it at the end of each month: what went as expected, what surprised you, and whether any limit needs adjusting for the next month. This short routine is what turns a one-off exercise into a useful habit.
If you do not yet have a way to track this automatically, creating an IOWII account brings your transactions, accounts and limits into one place.