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Making a budget

Budgeting advice. Why you need to budget

A budget is a list of all the money you receive and all the things you spend money on every month.

Making a budget is the first step towards taking control of your finances and getting your situation back on track. Budgeting helps you to see where your money is going, so it’s easier to make sure that you’ve covered all of the things you need to pay for.

Making a budget is a great way to spot areas where you can make savings.

As most of your household bills and debt payments are made monthly, we suggest that you change all the figures in your budget to monthly amounts.

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Step 1. Work out your total income

Add together all the income you get each month. Make sure you include everything, whether its wages, benefits or pensions. 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.

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’.

Budgeting FAQs

What is a budget?

A budget is a list of everything you spend and earn in a month.

What are the benefits of budgeting?

Whether you’re already worried about missing important payments, or simply wanting a clearer picture of your finances, there are lots benefits to making a budget.

This will help you find ways to save money, for example on energy bills. You may also find that you’re spending more than you thought on interest and charges for credit cards, overdrafts or catalogue accounts.

If you’re struggling to make payments you can often come to an agreement with creditors to make affordable payments, based on your budget. Share your budget with your creditors when asking them to agree to a temporary payment arrangement or a payment holiday.

How do you start a budget?

The best way to start is to gather recent bills, bank statements, wage slips and receipts to get a clear picture of your income and outgoings each month. Use a budget template to record realistic amounts for each category

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. If you’ve got weekly costs you’ll need to work out what this is monthly. To do this you need to multiply the cost by 52 and then divide it by 12.

How do I include costs that only happen occasionally on my budget?

These could be things like car servicing or birthdays. You need to work out how much you’ve spent on that cost over the past year and then divide this figure by 12. This will give you a monthly figure to put in your budget.

How can I reduce my living costs?

Regularly checking for better deals on your utility bills is just one way you can save money in the long term. Your budget will also help you monitor your spending and spot opportunities to save money.

Need help with budgeting and debt?

couple at their coffee table

Need help making a budget?

Come to us we'll work out your budget for you.

Get help online now