Budgeting guide

Creating a budget may be the last thing on your mind. However, a budget can make you feel more in control of your situation and can help reduce your worries about the added financial pressures. 

Step 1: Creating your budget

There are a lots of online budget tools and calculators and most high street banks will have one on their website. Budgets can differ in terms of what information you need to fill in, so it's a good idea to check a few out before deciding which one to use. Some of the best ones include:

If you prefer to do some number crunching yourself then start thinking about what to include in your budget and write everything down using the categories below. You will need to consider the following main areas:

  1. Your income: this includes your salary, any benefits you receive, contributions from friends and family or Child Maintenance. You may also want to list one-off payments, such as inheritance or tax rebates
  2. Your expenses: your general bills and outgoings, priority and non-priority debts and payments
  3. Your debts: credit card or loan repayments
Top tip! It’s helpful to have pay slips, bank statements and utility bills to hand while you do this. 

Step 2: Where does your money go?

To get you started, here is a general list of the main things to consider when working out where your money goes:

Housing costs: mortgage, rent, mortgage protection insurance, mortgage endowment, life insurance, service charges, house repairs/improvements.

Household bills: gas, electricity, water, Council Tax, TV licence, TV and video rental, satellite, internet/broadband, home phone, mobile phone charges, house and contents insurance.

General living costs: food shopping, snacks, meals at work, clothes, shoes, toiletries, baby essentials (nappies, wipes and so on), alcohol, cigarettes, cleaning products, laundry, pet food, vet bills, pet insurance, prescriptions for yourself (if you have to pay for them - they will be free for your child).

Employment: pension contributions, tax and national insurance (if you are self-employed), meals/drinks at work.

Travel: fuel, motor insurance, road tax, MOT, car/bike repairs, breakdown cover, loan/finance agreement, insurance, public transport, air travel, parking, taxis.

Childcare: childminder, nursery, activities or playgroups, school dinners, school trips, pocket money.

Leisure and entertainment: gym membership, sports classes, hobbies, eating out, holidays, haircuts, beauty treatments, birthday/celebration presents, takeaways, newspapers and magazines, lottery/gambling, music, film, meals out.

Step 3: Identifying savings

Look at how you spend your money and find ways to cut down on non-essential spending. Sometimes we are so used to doing something in a particular way that it's difficult to break habits and approach things differently. 

One example could be to switch to a cheaper gas and electricity provider. Make sure you check if there are any exit fees before you do. It's also worth knowing that some energy providers will offer lower tariffs if you are claiming certain benefits.

Where next? 

Updated July 2017, next review due 2018.