We think that creating a budget is one of the best ways to take control of your finances. That’s why we’ve added two new budgeting features to Emma! Read on to find out about these two new features, as well as how to budget using the Emma app.
Step 1: Decide That You Want A Budget
A lot of people are put off from creating a budget because they think it will restrict them from spending their money on the things they love. In reality, having a budget gives you more freedom to spend on things that matter to you.
For starters, setting a budget makes you think about how you’re spending your own money, and means you really assess what’s important to you.
Following a monthly budget also helps you spend within your limits, and can keep you out of debt. It also highlights any opportunities to cut costs, and can therefore help you prioritize adding more money into your saving or investment accounts.
Plus, creating a budget is actually a lot more straightforward than you might think, especially when you use money management apps like Emma. Follow the steps below to find out how to budget using the Emma app.
Step 2: Find Out Your Monthly Income
If you want to know how much money you can spend every month, you’re going to need to know how much money comes in every month.
Connect the account that your salary is paid into, and we’ll be able to work out your monthly income.
To find out how much you get paid each month, head to the Analytics tab and scroll through each of the categories until you see the “Income” category.
Click into this and you should spot your wage, as well as any other money that has been deposited into your account.
If you have your salary connected to Emma we can also remind you how many days until your next payday!
Step 3: Find Out Your Monthly Outgoings
Now you know how much money you have, you need to know how much money will be coming out of your account each month.
Again, if you have all your accounts connected to Emma we’ll be able to detect your committed spending.
You can see your total committed spending on the Analytics tab. This info can help you easily understand how much money HAS to come out of your account each month.
To check all your upcoming payments have been included under committed spending, make sure it has been listed as a “subscription”. To do this, go to the Feed tab in Emma, scroll down to subscriptions, and press “See All”.
If you notice we haven’t picked up one of your direct debits, standing orders or regular purchases then press “Add” in the top right corner. Here’s more information about adding a subscription.
Step 4: Work Out How Much Money You Have Left To Play With
Emma has so far identified how much comes in each month, and how much has to go out each month. The next step is to work out how much money you have left to play with.
Start with this calculation: Income – Outgoings = Left To Spend. For example: £2,000 – £1,200 = £800
Step 5: Set Your Total Budget
The next step is setting your total budget. To do this you’ll need to go to the Analytics tab and have clicked “budgets” in the top right corner.
You’ll first need to choose which budgeting period you want to use. You can choose payday to payday, or monthly.
Selecting monthly will start your budgeting period on the 1st and end it on the last day of the month. This is probably the best option if you don’t get paid on a regular basis.
Selecting Payday to Payday will sync your budget with when you get paid. Your budgeting period will start on the day you get paid, and end on the day before your next pay.
You’ll then be asked to add your total budget. Go back to our earlier calculation of Income – Outgoings = Left To Spend. You can then set your total budget to equal, or be less than whatever you calculated as “left to spend”.
Step 6: Set Your Budget By Category
Setting a total budget is a great first step, but if you want to have a more detailed budget, then consider setting a budget by category.
This is where you take your total budget, and divide the money between different areas of spending.
In order to divide your budget by category, you might want to think about what you want to spend your money on, and what your financial goals are, i.e. is adding money to a savings account more important to you than spending money in restaurants?
Looking at your past spending can also help you decide how much money to allocate to each category. To do this, head to the Analytics tab. From here you can use the small arrows above the categories to view your past spending.
Another way you can review your past spending is to click on the “budgets” button in the top right corner on the Analytics tab. Next to each category you’ll see your average spending history. You can use this information to influence how you set your budget by each individual category.
Step 7: Track Your Spending
Now that you’ve set your budget, we’ll help you keep track of your spending by grouping any transactions into your budgeted categories.
Throughout the month you can then check how much of your budget you’ve already spent by opening the Analytics tab.
If we think you’re likely to go over budget, we’ll drop you a friendly reminder so you can become more mindful of how you spend your remaining money.
Step 8: Review Your Budget
It’s good practice to review your budget every couple of months. Your priorities might have changed, your salary could be different, or your current budget just might not be working.
Our two new budgeting features make reviewing your budget super simple. Head to the Analytics tab and you can now view your past budgets and previous pay periods!
Spend some time going back over your past budgets and review how well you stuck to them. If you notice that you are continually going over budget in one area, then make the necessary adjustments.
For example, spending more on groceries than you have budgeted for every month? Either figure out a way to cut the cost of your monthly food shop, or allocate money from another category to spend on groceries.
Reviewing your budget is perhaps one of the most important steps in how to budget using the Emma app, so make sure you use these two new features to review how well your budget is working.