Practical Guide to Building a Monthly Spending Plan

Introduction

Money slips away quickly without a plan. From rent and energy bills to unforeseen expenses, it's easy to forget where each month's salary goes. This is where a monthly spending plan comes into play.

Unlike being tied down by a restrictive budget, a spending plan gives you structure while allowing flexibility. It helps you prioritise necessities, avoid debt, and enjoy life in the process.

In this guide, we'll show you how to create a monthly spending plan that works in the UK—whether you're paid weekly or monthly, or balancing a side hustle.

Why You Need a Monthly Spending Plan

A spending plan is not all about cutting back on spending. It is a matter of transparency and control. It matters because:

Lessens the stress caused by looking for where your money goes
Makes you ready for an unexpected bill, such as something to do with your car, or a dentist appointment
Keeps you from getting into further debts by making room for debt repayments
Helps you realise your goals like funding a holiday, paying a house deposit, or retiring.

Consider it a map for your money that tells you exactly what you can spend and what you need to save.

Step 1: Determine Take-Home Pay

Before planning spending, work out how much cash lands in your bank account each month. For UK workers, this means calculating your net income—after Income Tax, National Insurance, and pension deductions.

Check your payslip, or try a tool like our salary calculator for a quick estimate
If self-employed, estimate your average monthly income after setting aside money for HMRC payments
Include extra income from gigs like Deliveroo or freelance work, but be realistic

For a deeper walkthrough of using your payslip to plan, see Using Your Payslip in Monthly Budgeting. If you need a refresher on income terminology, read Gross vs Net Salary UK: What's the Real Difference?.

Example: For a gross yearly salary of £30,000, the after-tax take-home pay for the tax year 2025/26 will be around £2,000 a month.

Step 2: List Essential Expenses

These bills are one component of the non-negotiables—those bills that have to be paid for the household to continue existing.

Common essentials in the UK would be:

Rent/mortgage payment
Council tax
Gas, electricity, water bills
Food and groceries
Transport — fuel for the car or train; bus passes
Insurance — car, home, contents

Tip: Wherever possible, set your bills to be paid by Direct Debit. A lot of utility providers in the UK actually offer a discount if you pay this way.

Step 3: The 50/30/20 Rule (UK Style)

One popular way to categorise your spending is to use the 50/30/20 rule:

50% Needs- Rent, Bills, Groceries, Council Tax
30% Wants- Eating Out, Subscriptions, Holidays
20% Savings/Debt- Emergency Fund, ISA Contributions, Credit Card Repayments

For UK households, with Council Tax and rising energy bills, needs can easily go over 50%. If this happens, trim back on wants rather than skipping savings altogether.

Step 4: Track and Adjust

The best spending plans are flexible. Track your spending for a month using:

Banking apps (Monzo, Starling, or Revolut will automatically show spending categories)
Budgeting tools such as Emma, Snoop, or YNAB
Spreadsheets, should you prefer manual control

At the end of the month, review your spending:

Were you guilty of splurging on takeaways? Or subscriptions?
Were the bills heftier than anticipated?
Are there next-month opportunities to up your savings?

Armed with this knowledge, you can institute minor changes that add up over time; for instance, cutting £50 from eating out means £50 more into savings.
If you want a simple way to track progress over time, see our guide on tracking your net worth in the UK.

Step 5: Build in Sinking Funds

Unexpected costs are what derail most plans. And that's where sinking funds come into play.

Instead of getting frantic when MOT, Christmas, or insurance renewal charges come in all at once, just start putting aside a little cash each month:

£50 per month for a Christmas fund (£600 by December)
£25 per month for a car maintenance fund (£300 every year)
£40 per month: Holiday fund (£480 per year)

Most banks now allow you to split savings into "pots" or "goals" to help keep track. Monzo, Starling, and Nationwide all offer this feature.

Common Mistakes to Avoid

Being Too Strict: All fun spending is cut out, making the plan unsustainable
Forgetting Annual Costs: TV Licence fees, MOT, and insurance are easy to overlook
Not Adjusting for Irregular Income: Freelancers must plan based on average earnings, not best months
Not Planning for Debt Repayments: Prioritise high-interest debts before extra savings
For more practical ideas when money is tight, read Budgeting on a Low Income: Real Tips That Work.

Useful UK Resources

MoneyHelper Budget Planner – Free UK tool to create budgets
GOV.UK – Council Tax Bands – For checking what you owe by property value
Financial Conduct Authority (FCA) – on debt and regulated financial products

Conclusion

Planning monthly spending does not mean something as drab as living on beans and toast. It means knowing what happens to your money and making choices that resonate with your goals.

Work out your take-home pay, subtract essential expenses, and apply the 50/30/20 rule—you are the keeper of your own progress. Add sinking funds, and those massive annual bills will stop being nasty surprises.

If you don't know where to start, calculating your take-home pay is a great first step—a salary calculator is perfect for this. You can also dive deeper in our guide: How to Use a Salary Calculator (and Why Everyone Should).
If one of your goals is a first home, see our guide to saving for a house deposit in 2025.

Therein lies the philosophy: Start small, remain flexible, and always remember that your spending plan is supposed to work for you, not against you.