Making a budget

Budgeting advice. Why you need to 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

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.