If you’re worried about money or you’re actually struggling to make ends meet, you’re not alone. Lots of people are in the same boat. Managing money isn’t always easy. There’s so much to think about:

  • What happens if your income goes down?
  • What happens if your bills go up?
  • What happens if there’s an emergency waiting just around the corner?

Even when it feels like you’ve got things under control, it only needs one unexpected cost to knock you back into financial trouble.

Whether you’ve got money worries now or you can see them on the horizon, taking time to put together a budget can really help. The simple act of getting everything down on paper can make matters clearer. A good budget will show where your money goes each month and, just as importantly, where you might be able to save some cash.

What is a budget?

There’s no mystery to it. A budget is simply a list of the money you’ve got coming in (income) and the money you’ve got going out (outgoings).

Most people get paid a salary each month and make regular payments, such as rent and Council Tax, on a monthly basis. For these reasons, it makes sense to work to a monthly budget.

If you’re paid weekly or have weekly expenses, they can easily be included in your budget. Take your weekly payment or expense and multiply it by 52 (weeks). Divide the figure by 12 (months) and you’ll have the expense as a monthly cost. You can use the same formula to calculate your income if you get paid weekly. 

Making a budget

Sitting down to write a budget can seem intimidating. It shouldn’t be though; it's something you do all the time.

Let’s say you’re going to the cinema. Before you head out, you know you’ll have to pay for the taxi there and back. You’ll also have a good idea how much the tickets, snacks and drinks cost. Ahead of time, you’ll add everything up and make sure you’ve got enough cash to cover it. This is how you make a budget.

Yes, a personal monthly budget is a little more involved, but it follows the same principles. Basically, you calculate all your expenses and make sure you have the income to cover them.

What to include in your budget

So, what should you include in your budget? The easy answer: everything. Anything you pay out, whether it’s every month or a one-off expense, needs to be included in your outgoings. The same goes for your income. All the money you have coming in, including wages, benefits and any other earnings, should be noted down.


This is where you need to be the most thorough. Find all your documents and receipts. Include everything. If you don't know exact costs, use your best guess.

For example, if you have an electricity meter and can find all your receipts for the last three months, add them up and divide by three to get a monthly cost. Add a bit extra if your receipts are from the summer or reduce the figure if they’re from the winter. You’re looking for a typical monthly cost throughout the year.

Here are some example outgoings you should include in your budget:

  • Rent
  • Council Tax
  • Utilities (gas, water, electricity etc.)
  • Home phone and broadband
  • Mobile phone
  • Insurance (home, life, car etc.)
  • Travel costs (bus fare, train tickets etc.)
  • Petrol
  • Car costs (loan repayments, tax, repairs etc.)
  • Food shopping
  • Clothes
  • Loans and credit card payments
  • Childcare

Try not to miss anything out and be as accurate as possible. If you have to guess, especially about food shopping, it’s actually better to overestimate than work with a lower figure.

Examine your bank statements

While you’re in the process of noting down your outgoings, check through your bank statements with a fine-toothed comb. Don’t be surprised if you find small regular payments, such as subscriptions and warranties, which you’ve forgotten about.

What’s the point of budgeting?

Making a budget is a worthwhile exercise if you keep finding yourself without much cash at the end of each month. By making a budget, you’ll be able to see, at a glance, how much money you’ve got coming in. More importantly, you’ll be able to see exactly where your hard-earned cash is flowing out.

A budget gives you a firmer grip on your finances by distinguishing between the essential things you have to pay for and the luxuries you could live without. The added bonus? You’ll know exactly where all your money is going and you’ll start to feel you’ve got control of your finances.

Finding your disposable income

When you’ve finished your budget, you should have a figure for your total income and a clear list of your outgoings. Add your outgoings up and subtract them from your income. The figure you’re left with is your monthly disposable income. This is the cash you have to work with after you’ve covered all your other expenses.

The whole point of making a budget is to put you in control of your disposable income. If you want to buy a certain thing or put money into savings, you should be able to look at your budget and work out where else you might have to cut costs.

Budget tips

You can't always save money

It’s not always easy to reduce your outgoings. Your rent, for example, is more likely to go up than it is to ever come down. Yes, you could downsize or move to a cheaper area, but that’s more of a long-term option.

In the short term, your rent is a fixed cost. Council Tax is likely to be another fixed cost. That said, you’ll undoubtedly be able to find at least one outgoing that you’ll be able to reduce or, better still, cut out altogether.

Cutting costs

Once you’ve finished your budget, have a look at your outgoings. Your aim is to reduce or eliminate your regular expenses.

Remember the example of budgeting for the cinema? Let’s use this to illustrate the idea of cutting costs. Our budget for a cinema trip included:

  • Taxi fares both ways
  • Tickets
  • Snacks and drinks from the counter

In this scenario, you could cut costs by:

  • Catching the bus instead of a taxi
  • Looking out for off-peak or two-for-one ticket offers
  • Smuggle in your own snacks and drinks

The biggest way to save money on a trip to the cinema would be not bothering with the cinema at all. However, the aim of budgeting is make small changes that add up to bigger savings, not to make yourself miserable by cutting out everything you enjoy.

The things you should always cut out completely are unnecessary expenses. Maybe you have a gym membership that automatically comes out of your account…except you haven’t set foot in there for months. Perhaps you signed up to a TV streaming service so you could watch a certain show…but the show finished and there’s nothing else you want to watch. Time to cut the cord and use that money elsewhere.

When it comes to reducing rather than removing costs, think about whether there’s a cheaper way of doing a thing. Would switching to public transport for your weekly commute work out cheaper than fuelling your car? Could you car share with a colleague and get them to chip in for petrol? Could you switch to a cheaper phone tariff? Could you bring a flask of coffee and ditch the expensive high street lattes?

Make big shopping savings

You probably don’t realise it, but there’s almost certainly room to cut costs on your weekly food shop. Through a combination of clever store layouts and enticing offers, supermarkets encourage us to spend more than we need to. Some people still do a weekly ‘big shop’, but with local versions of our favourite supermarkets on every street corner, we’re far more likely to drop in and shop at random several times a week. More visits mean more impulse buys and less money in our pockets.

Here are a few tips for reducing your monthly spend on groceries:

  • Make a list and stick to it
  • Only buy what you need and try to do it in one big weekly shop
  • Buy larger packs and bulk buys for extra savings
  • Empty your cupboards at least once a month and use all the food in your freezer
  • Plan your meals in advance so you know what you’re shopping for
  • Set a budget and use the calculator on your phone to track your spending. When you hit your limit, head for the checkout.
  • Leave your credit and debit cards at home, and pay with cash. Handing over hard cash will make you think twice about the amount you’re spending.
  • Where possible, try the store’s own brands. Most of the time, they’re at least as good as the big name brands and they’re almost always better value.
  • Buy seasonal fruit and veg. It’s always cheaper than out of season produce.
  • Got leftovers? Look online for recipes to help use them up.

Living on a budget

Don't think about making a budget as a one-off exercise. It’s a valuable life skill, so it’s a good idea to do it every month. Seeing your outgoings on the page in front of you will make you more mindful about your finances. You’ll also be able to spot where you’ve wasted money, which might make you think twice about throwing your cash away next month.

Always look for where you can reduce your costs. Think about your household budget like an engine. You want it ticking over at maximum efficiency with no leaks. With all the wasteful sludge cleared out, you should be seeing your outgoings reduce and your disposable income increase.

There’s no way around it: budgeting takes willpower and discipline. Just like a diet or exercise regime, there’ll be slip-ups along the way. You’ll be tempted by unplanned nights out and unmissable bargains. But keeping a written record of your income and outgoings should be a big help in sticking to your goals and staying in control of your finances.

Getting help with budgeting

Check out our budgeting tools, including our budget calculator. These documents will help you organise your finances and manage your budget.