The short answer
Start with money coming in, subtract essential spending and allow for irregular costs. Then choose an amount that fits what is genuinely available. A savings target is useful only if it works alongside your bills and commitments.
Build a picture from real transactions
Use recent statements and bills rather than guessing what a normal month costs. Include income, housing, utilities, food, travel and other commitments. If income varies, avoid building your plan around your best month.
MoneyHelper’s free budget planner can total income and outgoings and show what remains. It is a useful starting tool if you do not want to create your own spreadsheet.
Include costs that are not monthly
Annual insurance, repairs, school costs and celebrations can make a budget look healthier than it is if you leave them out. List the costs you can reasonably anticipate and set aside a share of them as you go.
For example, an expected £240 annual expense would need £20 a month over twelve months. That is an illustration of planning a known bill, not a recommendation for how much you should save.
Give the amount a purpose and review it
Write down what the money is for and when you expect to need it. A near-term bill and a long-term goal may need different arrangements. You do not have to use an app or invest to start understanding your budget.
Review the amount after a month. If saving it repeatedly leaves you short for essentials, revisit the budget. Do not interpret an illustrative investment return as money you can rely on for bills.
ONE SMALL ACTION
Try this today.
List one month’s income and essential costs, then add one irregular bill. Write a provisional savings amount and a date to review it.
Add a task to my daily focusCommon questions
Should I save a fixed percentage?
A percentage can be a planning idea, but your actual costs and circumstances matter. Work through the budget before adopting a target.
Can the compound interest calculator predict my investment?
No. It illustrates assumptions you enter. Returns can vary, investments can fall, and fees and inflation affect outcomes.
General educational information, not personal financial advice. If you are struggling with debt or essential bills, use impartial money guidance before committing to a savings or investing plan.
Sources and further reading
These sources support the information identified in the guide. The exercises and examples are suggestions from It Is My Year.
Links checked 4 October 2026.
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