3 simple ways to manage your money

Budgeting doesn’t have to mean huge spreadsheets or wearing out a calculator. Find out about a few simplemoney management techniques.

1)  The envelope method

This is one of the simplestmoney-management methods around. It helps you to avoid spending more than you mean to and to understand where your money is going.

The first step is to create a budget. This means working out how much money you have coming in and working out what you need to spend in categories like rent, food and clothing over a week or month. If you need help doing this, try building abudget at the Student Calculator.

Once you’ve worked out how much you’ll spend in each category, get a pile of envelopes and label one with each category and the amount you’ve budgeted. Then withdraw enough cash to cover each category and put it in the envelopes. (Leave out categories like rent or phone bills that go straight out of your account.)

Once you’re set up, there’s a simple rule to follow: you can only spend the moneythat’s in the relevant envelope. If you really have to spend more, then you can move money from one envelope to another. This means that if you have to cut down what you spend on going out to pay for food, you’ll know about it - and if you’re spending your bus fare on nights out, then you can’t pretend you aren’t doing it.

To make it even easier to keep track of your money, you can make a note on the back of the envelope whenever you spend anything. That way you’ll know howmuch you have left without having to count.

2)  Keeping a spending log

So, what if you don’t know how much you need to budget each week? There’s an easy way to find out, and all it takes is a notebook and a pen.

All you have to do is write down everything you spend. You could do this by carrying your notebook with you and noting everything down straight away, or you could make sure that you keep receipts whenever you buy something and then note the details down all at once.

Writing everything down will make sure that you end up with a realistic idea of howmuch you are spending, which is vital if you want to set a realistic budget. But even if you never get around to setting that budget, knowing what you’re spending can provide the motivation you need to save money and keeps you from a nasty surprise when you check your account.

3)  Separate what you need from what you want

There are some things you can’t help but spend money on, like accommodation and food. Separating these needs out from things you just want can help you tounderstand how much money you have and avoid overspending.

The first step is to work out how much your needs will cost you. This is usually easier than putting together a full budget, as your needs vary less from month tomonth. Some, like rent, will be a fixed amount. Others, like food, you'll need toestimate - try to overestimate rather than underestimate these to make sure you don't run out of money.

Once you’ve done that, you can work out how much money you have left over, and make sure you don’t spend more than that on wants like going out or buying music. You can make this easier by separating out the money you allow yourselfto spend on wants. For example, you could withdraw the cash from your bank account at the start of each month. That way, you can see how much you have leftto spend on luxuries and you can’t accidentally go over your budget