5 Things Every Budget Plan Should Account For

There is no denying that budgeting is a skill. Knowing how to effectively budget your wage can seem hard – and it is – but it’s made harder by the misconception that every single spare cent should be spent on savings. This is why a lot of people fail at saving because they set unsustainable goals. If you’re looking to start saving, here are five things your budget plan should account for.

Budget Planning


Naturally, bills should always come first and foremost when you’re building a budget plan. How much money you have leftover after paying your bills will dictate how much you can allocate to the other four items in this list, but it’s important that you never skip on your bills just to allocate money to the other four sectors.

Your bills might vary from another person’s depending on your financial situation. Things that constitute as bills and that should always be prioritized include:

  • Rent/mortgage
  • Utility bills
  • Car payments
  • Insurance
  • Phone bill
  • Groceries
  • Pet expenses
  • Debt repayments

It’s a good idea to schedule these payments to all come out on the same day if possible, specifically a day or two after your pay day to ensure the money is there. This will allow you to see exactly how much money you have left over for the remaining four sectors whilst giving you the peace of mind that everything you need to pay for has been paid.

Budget Planning


The second most important thing to budget for is savings, but this is where most people go wrong. Lots of people assume that after bills, every spare penny should be squirreled away into savings, but this isn’t true and sets you up for a splurge later down the line. It’s a good rule of thumb to allocate 10% of your salary into savings, so if you earn $2,000 per month, a minimum, $200 into savings is a good place to start, but you need to decide what your savings are going to be used for.

There are two types of savings that you should consider:

  • Contingency
  • Long-term

Contingency savings are used for unforeseen expenses, such as replacing an expensive household appliance, paying for car repairs or for use as a buffer if you lose your job. When setting up a contingency account, it’s a good idea to keep it so that you can make withdrawals and when they’re needed, although this does require as aspect of self-discipline.

Long-term savings can be used for college funds, a house deposit or retirement. If you have a temptation to spend your savings, it’s a good idea to put your long term savings into a locked account that prevents withdrawals for a set period of time, or where you can only withdraw the money if you close the account.

It’s a good idea to split savings equally between the two types of savings accounts if you plan on having both, but don’t feel like all your spare cash needs to be put into savings.


As an act of goodwill, it’s nice to reserve a small bit of your monthly budget plan for charitable donations, or even for holding events which involve a 50/50 raffle or other incentives for people to donate money themselves to a charity of your choice. Of course, if you already donate your time through volunteering, you shouldn’t feel the need to do both, but if not, a charity direct debit is a good idea.

Most people usually have a cause that is close to their hearts, be it funding cancer research or feeding the homeless, so there’s bound to be a charity that strikes a chord with you that could benefit from a small donation every month.

Some people have religious commitments which mean that they need to pay zakat (Islam) or donate to church charity drives, in which case this definitely needs to be budgeted for. For those who don’t have religious charity commitments, it’s still a nice idea to allocate money for it, if not for the charity itself, for the multitude of benefits you can get from it.


It’s essential that you leave enough money to fund a hobby or a day out for your mental wellbeing. Saving for one big day out a month to a zoo or theme park is a great idea because it means you can have something to look forward to, but in a way that won’t leave you out of pocket.

Hobbies can be expensive, but that doesn’t mean you shouldn’t do them. Set a budget and stick to it, e.g. $100 a month for a day out or for craft/hobby supplies. This will do wonders for your mental health and keeping your brain focused, as well an benefitting your social life, and that’s why recreational activities should be allocated for where possible.


Not to be confused with recreational budgeting, the treat section is where you can budget to buy yourself something nice. Be it a splurge on clothes or a piece of jewelry, allowing yourself to buy something a bit frivolous is essential. After all, you work hard all month and for that alone, you deserve a treat!

Following this budget plan means you will be able to cover all the things you have to pay for such as bills, but it also means you can effectively save whilst enjoying life. As the saying goes, you can’t take your money to the grave, so make sure you enjoy life whilst you can.

Find even more finance tips in our archives.

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