Money basics

Creating a budget

Spending wisely

Spending wisely

The information in this guide was last updated on 26/02/2014

If you’ve made a budget and prioritised your spending, you’re off to a great start. Here are some useful money tips to keep you on track. 

Stick to cash for non-essential spending

If you find that cash withdrawals for impulse buys are making a big dent in your bank balance, try withdrawing a set amount of cash each week. Although debit cards are quick and convenient, using cash like this gives you a lot more visibility about your cumulative spending.

Set up different accounts for different things

With a single current account, all the payments come from one place, which can make it difficult to track what you’re spending on different things. Setting up a second account that you only use for essential spending – for example council tax, utility bills, and food shopping – means you can put enough in that account each month to make sure you are covered.

Styles of spending

Knowing your personal style can help you make better decisions about managing your money. For example, if you like to be free to make impulse buys, you could allocate yourself a ‘pocket money’ budget each month to spend on whatever you like. And if you prefer to plan things out, you can build in some time for comparison shopping each week to dig out the best deals.

Find the right current account for you

Most banks offer a few different types of account.

  • The most common type is a standard current account, which offers debit cards, cheque books, online banking and facilities like overdrafts and Direct Debits.
  • Packaged bank accounts come with extras like insurance or special interest rates. To use these you may need to pay a monthly fee or pay in a minimum amount each month, so check that the benefits suit your needs – for example, free travel insurance isn’t much use to you if you already have this packaged with another product you hold
  • There are also basic bank accounts that just store money safely, with only basic banking facilities such as a debit card, standing orders and Direct Debits.
  • Many current account providers offer accounts geared towards students and new graduates, which may offer cheaper or free overdraft facilities, and accounts for young savers.
  • If you share bills with someone else, think about whether you want to open a joint account that you can both use

For more tips on finding the right account see choosing a current account.

Use credit cards wisely

Credit cards can be a useful way to help manage your expenses more flexibly, but it’s essential to remember that they’re a form of borrowing, just like taking out a loan or using an overdraft. That means you’ll always have to pay back what you’ve spent – and if you don’t pay your card off every month, there will usually be interest added on top of what you've spent.

Before deciding to make a purchase on a credit card, think about the total amount you'll need to pay back and how long you’ll have to spend paying it off. Ask yourself: ‘Is this the best use of my money?' This should help you make an informed decision about whether the convenience of having what you want now is worth the extra cost of paying off the credit card balance.

Cutting back