Set up a budget to give yourself a clear picture of your financial situation; you can then analyse your finances, take any appropriate action and start making plans.
There are various Budget Planner Tools to help you record and analyse all your income and outgoings. Or set up your own computer spreadsheet, or simply write it all down, following the guidelines below.
Budget Planner Tools
Most banks can provide you with an online budgeting tool, which uses information directly from your transactions.
Other online tools:
Budget Planner Tool – Money Saving Expert
Available as an online tool, a spread sheet or a printout version
1. Record sources of income
Include wages/salary and any benefits.
If you get a regular salary, note when it is paid in. To avoid going overdrawn, set up direct debits/standing orders for regular bills to be paid a few days after your money comes in.
UK Salary Calculator
Free iPhone/iPad app that calculates take-home pay, taking into account tax rate, student loan repayments, national insurance & pension contributions.
2. Record expenditure, dividing into ‘needs’ & ‘wants’
First focus on your needs:
- Regular commitments such as rent, utilities, insurance, loan repayments
- Living expenses like groceries, petrol, fares to work etc.
- Don’t forget compulsory one-off/annual expenses like car tax and MOT, Christmas, plus tax and National Insurance if you are self-employed
Then, once you have taken care of the essentials,
prioritise your wants e.g. leisure, treats and longer-term goals like holiday savings or paying off debts.
3. Decide what you can afford
Based on money coming in and the cost of your key needs, see how much spare cash is left; decide what you can afford to spend, save, or where you could cut costs if necessary. Know when to say ‘No!’
Using your Budget Planner, plan the amount of money you allow yourself to spend and stick to it.
Focus on areas where you could cut back to save a bit of money.
Shop around – get personal recommendations and use comparison websites to check out deals on everything from household bills to finance, travel & entertainment.
Find out more:
Living on a Budget – Money Advice Service
Guide to budget planning, cutting costs & saving money
Set a savings goal
Once your financial situation allows, start by putting some money away in an Easy Access Account, in case of emergency.
Then try to save regularly, gradually building towards longer-term goals like a car, holiday etc. You could set up a monthly standing order to pay into a savings account.
Find out more:
Types of savings accounts, how to choose etc.
Review your budget if your situation changes e.g. you get a pay rise, or your bills increase.
Be flexible, adapt as necessary.