Step 2. Make a list of everything you spend each month
Start with your most important bills, such as your mortgage, rent, council tax and utilities like gas, electricity and water. These are classed as priorities because they have the most severe consequences if your payment is late or if you miss a payment. Find out more about what bills to pay first.
Next, write down what you usually spend on living costs such as food, clothing and toiletries. Shopping receipts can help you work out what you typically spend on these items each month.
You need to include amounts for things that you only pay for once a year or less often, such as Christmas, car repairs or vets bills. 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, try writing down everything you buy over a month. This will give you a clearer idea of your regular spending.
Step 3. 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’.