Lesson 3 of 8
Where your money goes each month
6 min read
You cannot direct money you cannot see. Before any budget can work, you need an honest picture of where your money already goes.
Three buckets
Sort your outgoings into three groups:
Fixed costs. Rent or mortgage, council tax, utilities, insurance, phone, transport season tickets, subscriptions, minimum debt payments. These leave whether or not you pay attention. They are the hardest to change quickly and the most powerful to change permanently - moving one fixed cost down by 40 a month is worth more than a hundred small acts of willpower.
Variable essentials. Groceries, fuel, household basics, childcare top-ups. You must spend here, but the amount flexes with your choices.
Discretionary. Eating out, hobbies, clothes, holidays, the things that make life feel like yours. This is not the enemy. A budget with no discretionary spending in it will fail within six weeks.
The 50/30/20 guide
A widely used starting point splits net pay roughly:
- 50% needs - fixed costs plus variable essentials
- 30% wants - discretionary
- 20% saving or extra debt repayment
Treat this as a compass, not a rule. In an expensive city, needs may take 65% and the honest question becomes which of the other two absorbs it. What matters is that the third bucket is not permanently zero.
Find your real numbers
Pull three months of bank statements and total each bucket. Three months, not one - it catches annual insurance, car servicing, birthdays and the quiet subscriptions.
Two things nearly always turn up:
- Forgotten recurring payments. Almost everyone finds at least one subscription they had stopped using.
- A category that is much bigger than assumed. Usually food, transport or one specific habit. Not a moral failing - just information.
Then decide once
The most effective budgeting move is not daily discipline; it is one-off decisions that keep working. Cancel the unused subscriptions. Move the standing order for savings to the day after payday. Switch the energy tariff. Each of these takes ten minutes once and then runs on its own for a year.
Put your three numbers into the mySal budget planner and you have a working baseline. Next lesson: what to do with the money you free up first.
Key terms
- Fixed cost
- A regular outgoing of roughly the same amount each period - rent, insurance, subscriptions.
- Variable cost
- An outgoing that changes month to month - groceries, fuel, going out.
- Discretionary spending
- Spending you genuinely choose and could stop without immediate consequences.
- 50/30/20
- A rough guide splitting net pay into 50% needs, 30% wants, 20% saving or debt repayment.
Quick check
2 questions. No pass mark — this is just to make it stick. Sign in free to save your score.
Homework
0/3 doneThree small jobs. They take minutes and they're what makes the lesson stick.
- 1
Make it personal
In two sentences, write what "Where your money goes each month" changes about how you handle your money this month.
- 2
- 3
Teach it back
Explain the main idea of this lesson in plain English, as if to a friend. Write the explanation you would give.
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Your notes
Private to you. Jot down the bit that mattered, a number to check, or a question to come back to.
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Get started freemySal Academy is financial education, not financial advice. It explains how things work in general terms — it can't recommend products, investments or what you personally should do. For advice about your own situation, speak to a qualified adviser or your local tax authority.