Budgeting
Step 1: What does budgeting mean?
Budgeting is an important part of managing money. When we
budget, what we are doing is making sure we do not spend more money
than we have. This helps us stay in control of both our money and
our lives.
Step 2: How do I go about budgeting?
Money coming in
The first thing you need to do to set up a budget is work out
how much money you have coming in – this is what is called your
income.
Income can come from a number of different places such as wages,
benefits, pensions, rent from a lodger and maintenance payments, so
spend some time working out where all your money comes from and how
much you are getting.
Money going out
The next step is to work out how much you are spending. You
often hear this talked about as your outgoings or expenditure.
Examples can include:
- Rent or mortgage
- Council Tax
- Utilities bills (gas, electricity, water)
- Telephones
- Television
- Insurance
- Food
- Transport
- Clothes
- Going out
- Childcare
- Maintenance payments
- Paying back any money you owe.
Most people tend to look at spending on a monthly basis,
probably because wages tend to get paid monthly and we usually pay
for big things like rent or our mortgage once a month. Because of
this, when you are making a note of your spending, it is important
to remember things that you do not spend money on every month.
Examples include gas and electricity bills, water rates and things
like car tax.
Keeping a spending diary
If you do not have a realistic idea of how much you are
spending, your budget will not work. The problem is that money gets
spent all over the place, so it is very difficult to keep track of.
While most of us know how much we spend on things like rent or
child care, it is much harder to stay on top of the little things
like, snacks, newspapers and gifts.
A lot of people find that the best way to work out exactly how
much they are spending is to keep a spending diary. To do this,
every time you spend some money you just need to write down how
much you spent, what you spent it on and when you spent it. You do
not need to do this forever, just until you have built up a good
picture of your spending.
To have a go at working out your spending, visit
What am I spending my money on? (link opens in a new window) on
the Money Matters to Me website.
Step 3: Making your budget
Once you know how much money you have coming in and going out,
you can make your budget. You can easily do this on a piece of
paper:
In one column write down how much you have coming in
In another column write down everything you have going out
By taking away what you have going out from your income, you can
see what’s left.
If you are spending more money than you have, or you would like
to have more left over, you need to go back over everything that
you spend money on and work out where you can make savings.
Step 4: Would you like to know more?
The Money Advice Service can help you
create a budget (link opens in a new window) and also
features a
budget planner (link opens in a new window).
Last updated: 4 April 2011
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