A budget is a list of all the money you receive and all the things you spend money on every month.
Budgeting helps you to see where your money is going, so it’s easier to make sure that you’ve covered all of the things you need to pay. It also helps you set financial goals.
Whether it’s scribbled in a notepad or put into a spreadsheet, budgeting is an important life skill.
Lots of people struggle financially because they don’t plan their spending, or know what their income is. Planning how to use your money may help you:
Avoid getting into debt (or help you get out of debt)
Plan for big one-off expenses
Spot potential money-saving opportunities
How to make a budget
1. Get your financial information together
You’ll need to gather together all of your financial information including:
Your regular household bills (council tax, gas, electricity, phone, internet)
Your living costs (food, toiletries, prescriptions, clothing)
Any insurance policies you have (home insurance, pet cover)
Your travel expenses (car costs, bus fares)
Your leisure costs (gym membership, cinema trips)
Any debts you have (loans, credit cards)
2. Calculate your income
Your income is the money you receive each month from any work you do, as well as from benefits, pensions, investments, or money from partners or relatives.
3. Calculate your regular spending
Look at what you spend every month in each of the following categories:
Household bills and services
Housekeeping, including food, cleaning, pet costs and clothing
Leisure and entertainment
Health and personal care
Other essential living costs
Tip: If you’re spending a lot of money every month on debt repayments and are struggling with your day-to-day expenses, you may need free, independent debt advice. Visit StepChange Debt Charity’s website www.stepchange.orgfor more information.
4. Don’t forget to budget for one-off expenses
One of the aims of creating a budget is to plan your spending thoroughly. Do you need to pay for a large one-off expense later in the year such as a car service, or a repair to your home? Make sure you add this to your budget.
You can do this by taking the amount you’ll need for the one-off expense, then dividing it by 12 and adding it your monthly budget. You then put this amount aside every month. Putting it in a savings account away from your day-to-day bank account can help you avoid dipping into it.
5. Check if you have a ‘surplus’ or ‘deficit’ budget
Once you’ve added together your monthly income, and taken away your outgoings – have you got money left over?
If you do, this is called a ‘surplus’. You should use this to pay towards any debts you might have, or add this to a savings account.
However, if you’re spending more than your total income each month you have what’s called a ‘deficit’ budget.
Spending more than you have coming in means that you’re at risk of getting into financial difficulties, especially if you’re using credit to pay for everyday living costs, or are dipping into your overdraft on a regular basis.
You may want to consider revisiting your budget to see if you can cut back in any areas. You should also consider getting free debt advice – using overdrafts and credit cards in this way is a danger sign of debt.
6. Put money aside
If your budget allows, you should put money aside each month into a savings account.
It’s a good idea to have one for larger, planned one-off purchases, and another for creating an ‘emergency fund’.
Having some ‘rainy day’ savings can help you avoid getting into debt if you have an income shock such as redundancy or illness.
7. Track your spending
It can be helpful to carry a small diary or use a budgeting app to keep track of your spending. It’s easy to forget small purchases, but they soon add up!
Tracking your spending helps you understand where your money goes, but it can also affect how you spend your money too. Writing down every penny you spend may make you less likely to splurge on something you don’t need.
Tip: Use cash not card. It’s very easy to lose track of your spending if you’re using your debit card, and especially if you’re using contactless payments.
8. Look for ways to save
In almost every budget there may be opportunities to save a little more money. Ask yourself if you could:
Move to a cheaper phone/text/data tariff?
Switch to a cheaper TV package?
Save money on your insurance by comparing deals next time it’s up for renewal?
Making these reductions could free up valuable extra money to help you keep on top of your household bills or boost your savings.
9. Review your budget regularly
Once you’ve started to budget effectively, you should review your spending regularly. There’s no set time to do this, but it’s worth checking every few months.
During your review you should check:
Has your income increased or decreased?
Are there items you no longer need in your budget?
Have any of your costs increased or decreased?
Have any of your benefits entitlements changed?
Does your budget match what you’re actually spending?
Are you on target to build up any savings or pay off any debts?
We’re committed to working with members, local organisations, and employers to increase financial awareness in the wider community. If you have any questions or would like help with any of our services, please contact us on 0141 274 9933.
Please check first that you are eligible to apply:
You are aged 18 or over
You have a UK bank account in your own or joint names
You are a permanent UK resident
You have never been bankrupt or had a Court Decree
To complete your application you will need:
Your current employer's address details
Details of monthly income and outgoings
Bank or building society details (sort code and account number)
To enable us to make a decision on your loan application we will contact Credit Referencing & Fraud Prevention Agencies. This will register a search against your credit record and if your application is successful we will share the information we hold for you with these agencies. Further details are available in our Privacy Notice
It is important that you read the Privacy Notice document above. If there is anything that you do not understand, please contact us.
Please be aware that the longer you take to pay back a loan, the more you will pay back in interest. If you go for a shorter term your monthly repayment might go up, but you'll save in interest and pay back your loan faster.