Keep finding yourself strapped in the run up to pay day? Feel like you’ll never have enough spare cash to put into savings? Struggle to explain where your salary goes each month? If any of this sounds familiar, you might find it useful to make a budget.

A budget is simply a list of the money you’ve got coming in each month and the money you regularly pay out. Once you’ve put your budget together, you should have a much clearer idea of what you’re spending your money on and where you might be able to make savings.

What you need to create a budget

Your budget’s going to be a ‘living’ document that you add to, update and refer to each month. There are lots of formats and styles of budget document, but we’ll look at those in a moment. Before you get started, you’ll need to gather all the information to actually put into your budget.

List the money coming in

You’ll need to draw up two lists. Let’s start with the easier of the two: the income list. In most cases, your income list will be much shorter than your outgoings list. It should include your wages from your main job; any money you get from freelance or part-time work; and any money from benefits or a pension. If you have a partner and pay for things as one household, do the same for their income and add it to your list.

List your regular outgoings

A full and accurate list of your outgoings will probably take you a bit longer to put together. It could also be a little more uncomfortable to write, as you’ll need to be honest with yourself about what you’ve paid for and how much you’ve spent.

If you’re creating a budget to help get your finances under control, leaving items off your list because you regret buying them won’t help you in the long run. Accuracy is everything. If you have to estimate certain costs, try not to underestimate. It's better to round up by a few pounds. That way, if you’re not exactly spot on, you’ll end up with a bit of spare cash rather than an unexpected cost.

To help make your figures as accurate as possible, you should gather all your receipts and bank statements from the last three months. For utilities, like gas and electricity, work out an average figure for the last three months and include that in your budget. Do the same with your grocery shopping and other household spending, such as clothes shopping.

If you can’t find a particular receipt or statement, use a ‘guesstimate’ for your first month. You can always update the amount to a more accurate figure next month.

Prepare your budget

When it comes to creating your budget, you have a few choices. First, you’ll need to decide whether to make a hard or digital copy.

Hard copy

The most basic means of recording your budget is on paper. You can use a notebook or a pad with gridlines, but it really doesn’t have to be anything fancy. A sheet of A4 with two columns will do. Put your income on the left, your outgoings on the right and leave space for your totals at the bottom. That’s it, you’ve created a budget.

The advantage of paper is you can start straight away, wherever you are. You can also pick up and change your budget quickly, as and when you need to. The downside is the bit of extra effort required to do the calculations manually. You also need to take a bit more care as mistakes and crossing-out can make your budget messy and hard to follow.


If you’ve got the right software, you can make a budget on your computer. A spreadsheet program like Microsoft Excel will, once it’s up and running, do your calculations for you.

If you have the skills or the patience to learn, you can set up your own budget spreadsheet exactly how you want it. If not, and you don’t mind using someone else’s framework, you can use ready-made templates like the ones in Google Sheets.

The advantage of using a digital budget is the ease with which you can edit your figures and see the results instantly. The downside is spreadsheets can be tricky to use until you get the hang of them.


Budget apps for your smartphone combine the number-crunching power of a computer with the portability of paper. There are a number of Android and iOS apps you can use to create your budget. Some, like Wally and Money Dashboard, are free.

Discovering your disposable income

Once you’ve added your income and outgoings to your budget, it’s time to work out how much you’ve got left to spend or save. Deduct your outgoings from your income and you’re left with your disposable income.

If your outgoings are greater than your income, you have a negative cash flow. Don't panic. This is why making a budget is so useful. It’s also why you have to be completely honest with yourself when you create a budget. It really does clarify your financial position.