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Making a budget

How to make a budget

A budget is a list of all the money you receive and all the things you spend money on every month. Creating a budget is the first step towards taking control of your finances and getting your situation back on track.

When you put budgeting into practice, it can help you see where your money is going and make sure that you’ve covered all of the things you need to pay. You can also spot areas where you can make savings. As most of your household bills and debt payments are made monthly, we suggest that you make all the figures in your budget calendar monthly.

If you're looking for a simple way to help you manage your money and track your outgoings, you may find our free budget template useful.

Or, if you'd prefer, we have the same budget template in Excel

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How to make a budget

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Look at the money you've got coming in

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Add together all your monthly income including wages, benefits, pensions and housekeeping money from your partner or relatives.

If some of your income is paid weekly or 4-weekly, you’ll need to turn these figures into calendar monthly ones. To do this you need to multiply the weekly figure by 52 and then divide this by 12. This will then give you a calendar monthly figure to include in your budget.

Understand how much you're spending

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Make a list of everything you spend each month, including things you only pay for once a year or less often (Christmas, car repairs or vets bills, for example).

To do this you need to divide the yearly cost by 12 to give you a monthly figure which you can include in your budget. You can then set this money aside until the bill is due.

If you’re not sure what you’re spending your money on, write down everything you buy over a month. This will give you a clearer idea of your regular spending.

Work out how much you've got left each month

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Deduct the total amount you spend each month from your monthly income. If you’ve got any money left over after you’ve paid for everything you have a ‘budget surplus’.

If you’re spending more money than you’ve got coming in you have a ‘budget deficit’.

Budgeting FAQs

How can I save money on a budget?

Once you’ve worked out how much money you’ve got coming in and how much you’re spending, you’ll spot areas where you could make savings. We’ve got lots of tips for saving money - here are our most popular guides.

How do I make a monthly budget?

Even if your wages and regular bills aren’t paid monthly, a good way to get a clear understanding of your finances is to work out a monthly budget.

If you know what the yearly total for a bill or your salary is, divide that amount by 12.

Don’t forget to calculate council tax correctly – it’s usually billed across 10 months of the year. To find out how much you need to put aside for council tax, multiply the monthly payment by 10, then divide by 12.

Follow our tips on completing your income and expenditure statement to make your monthly budget.

How do you create a budget to pay off debt?

Use our free budgeting template to work out your current situation.

You’ll need to add details about:

  • Your income: Any wages, benefits and pensions you receive
  • Your household spending: How much you need to spend each month on food, heating and other essentials
  • Your debts: How much you owe, how much you’ve agreed to repay, and any interest and charges.

Find out more about your debts and check who you owe money to.

I need help building my budget - what can I do?

Our online advice tool can help you put together a personal action plan. It can talk you through each stage of putting a budget together and help you prioritise your living expenses. 

Or, you can also get in touch with us by phone and go through a budget with one of our friendly advisors.