Making a budget
A budget is a list of all the money you have coming in and going out each month.
Making a budget is the first step towards:
- Taking control of your finances
- Getting back on track
Budgeting helps you:
- See where your money is going
- Make sure everything you need is covered
- Spot where you can make savings
Three Reasons Why Budgeting Matters
Life can take many twists and turns, and unexpected events can shake things up. Whether it is health issues, job changes, or a personal loss, your finances can take a hit.
Check out these three reasons why budgeting matters.
- Managing the unexpected. Rising costs, surprise bills - we get it. Budgeting can help you handle the unexpected
- Achieving goals. Putting money aside can help you meet your goals
- Keeping debt at bay. Budgeting keeps you in control of your money, so you are ready to face challenges head-on
Need help making a budget?
Come to us we'll work out your budget for you.
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Step 1. Work out your total income
Add together all the income you get each month.
Make sure you include all:
- Wages
- Benefits
- Pensions
Turn income that is paid weekly or 4-weekly into a calendar monthly figure.
To do this:
- Multiply the weekly figure by 52 (the weeks in a year)
- Divide by 12 (the months in a year)
- The result is the monthly figure to include in your budget
Step 2. Make a list of everything you spend each month
1. Start with your most important bills, such as:
- Your mortgage/Rent
- Council tax
- Utilities like gas, electricity and water
These are your 'priority bills'.
Find out more about what bills to pay first.
2. Next, write down what you usually spend on living costs, including:
- Food
- Clothing
- Toiletries
3. You need to include things you pay for less often, like:
- Christmas
- Birthdays
- Holidays
- Car repairs
- Vet's bills
To do this:
- Divide the yearly cost by 12 (the months in a year)
- This gives you a monthly figure for your budget
- Set this money aside until the bill is due
It may help to write down everything you buy over a month.
Step 3. Subtract your spending from your income
Any money left over after everything is paid for is called a ‘budget surplus’.
It is called a 'budget deficit' if you spend more money than you have coming in.
Budgeting FAQs
What is a budget?
A budget is a list of:
- All the money you have coming in
- All the money you have going out
Usually in a month.
What are the benefits of budgeting?
Budgeting can help you:
- Get a clear picture of your finances
- Make sure you have enough for important payments
- Make payment agreements with creditors
- Ask for a temporary payment arrangement or a payment holiday
- Find ways to save money
- Find places where you spend more than you think. This is often:
- Interest and charges for credit cards
- Overdrafts
- Catalogue accounts
How do you start a budget?
The best way to start is to gather:
- Recent bills
- Bank statements
- Wage slips
- Receipts
Then use a budget template to input realistic amounts for your income and spending.
Follow our guide to making a budget.
How do I work out my income or spending for a calendar month?
Most budgets use monthly figures.
- Multiply the weekly figure by 52 (the weeks in a year)
- Divide by 12 (the months in a year)
How do I include costs that only happen once or a few times a year?
These could be things like car servicing or birthdays.
- First, work out what you spent on that cost in the last year
- Divide by 12 (the months in a year)
This gives you a monthly figure for your budget.
How can I reduce my living costs?
Having a budget helps you monitor your spending and spot opportunities to save.
This could mean:
- Planning meals and batch cooking
- Being conscious of energy use
- Walking or cycling instead of taking transport
- Buying second hand or recycling clothes
- Checking for better deals on your utility bills
Read our full list of tips here.
Need help with budgeting and debt?
Need help making a budget?
Come to us we'll work out your budget for you.
Get help online now
Useful budgeting links
- Money HelperThis website is full of budgeting and money management advice. It includes what you should do with your money if you've got a bit left over each month.
- Money Saving ExpertFounded by Martin Lewis, MoneySavingExpert.com is home to a host of budgeting information and money saving ideas.
 - Shopify)