How to Budget

Budgeting can help you take control of your spending and make sure you always have enough money for the things you need to spend it on. Doing a budget is a really good way of looking at where your money goes.



Take a look at the tips on “Be S.M.A.R.T for 2008” below.

You could run a weekly or monthly budget depending on how frequently your income is paid, or a combination of the two.
Whether you receive a salary or benefits & pensions, you can still run a successful budget.

Some people prefer to pay regular bills by monthly or weekly instalments either by direct debit or payment cards. Others prefer to save a regular amount so that bills can be paid quarterly (gas, electric, water) or yearly – motor & home insurances, TV licence, car tax.

Use the facilities that your bank account may offer to help you budget, such as free internet banking or telephone banking to check your bank account regularly.

You also need to keep track of any cash withdrawals to help you keep to the spending limits you set yourself.

Remember, the small amounts count-

Daily spend on coffee & a muffin - £2.50 = yearly spend of £648!!!!!!!!!!

Here’s a simple plan to get you started:

Step One: Total Income


Most people find it easier to work on a monthly budget. This means that you calculating a monthly figure for any income that you receive weekly, fortnightly or 4 weekly:

Weekly figure received: multiple by 52 (weeks per year) and then divide by 12 (months in the year)

Fortnightly: multiply by 26 (fortnights per year) and divide by 12 (months in the year).

4 weekly: multiply by 13 (there are 13 payments of 4 weekly income per year) and divide by 12.

Budgeting on a calendar monthly basis helps as most payments for priorities or creditors are monthly. It also means you are considering every single cost over a full 52 week year.

Step Two: Total Expenses


Some costs will be monthly – mortgage/rent, utilities, etc and some may be quarterly or half yearly costs – TV licence, car tax, insurance on household goods or breakdown cover for boilers/leaks.
Some will be weekly and are more likely to be the items that you buy with cash, or on a debit/switch card or cheque (food, petrol etc.)
You also need to include a monthly figure for clothing and any savings you need for birthdays /Christmas or towards emergencies like car or house repairs. It may be easier to work out what you need to spend over a year, and then divide that figure by 12.

Your budget must be updated if you get a pay rise, or if your costs increase, like mortgage & rent increases, utility bills and insurance.

Hopefully, your income will exceed your expenses and you will have a surplus, meaning you can afford to cover all your costs without using any credit for day to day living costs.

*** If not, you should take immediate action to ensure that your priorities are covered (housing costs, utilities, TV licence, car tax & insurance) by reducing any unnecessary expenses, such as leisure, sky TV and any high spending on clothes, tobacco etc.
You can also look at reducing your spending on priorities where possible ***

If you have outstanding credit debts – loans, credit cards, store cards, catalogues, car finance or HP, deduct the total monthly cost of your credit repayments from your surplus.

*** If your expenses already exceed your income before you add up your credit debts , or the credit debt payments take you into a deficit, you should take the steps to try and reduce your costs but also need further advice to help deal with your credit debts *** contact CCCS immediately.

Step Three: How to use your budget


There may be some items that you pay for during the year but not necessarily every month or every week.
Once you have identified how much you need to budget for these items, you should set aside a monthly figure from your budget.
Two possible methods of doing this are:

Separate & Save

Take the monthly figure you need and transfer it to a savings account.
You could choose a savings account linked to your bank account, so you can transfer amounts back and forth, or an instant access savings account with a cash card/pass book for withdrawals.

You could use one savings account for all your budget items, or have separate ones for each item (car, clothing, Christmas).

By using the money in the savings account only when one of these items is required means you will always have the money available.

Example:
Jan - £25 set aside for clothing
- £20 spent = £5 left in savings account
Feb - £25 set aside, plus £5 left over from January = £30 available to spend

Building & Balancing

Same theory as Separate & Save, but the monthly budget amount you have calculated stays in your bank account. So over the year you build up a large figure in your bank account BUT with this method you have to remember only to spend the money on what you have budgeted for.

Both of these methods require willpower and require you to take responsibility for your own spending habits.

*** By opening a savings account and bank account with a good interest rate – many accounts start paying interest on balances as low as £1, you could earn some extra interest over the year.****


Some people find it useful to keep a record of spending – either on paper or using a spreadsheet or even your mobile phone.

It is also necessary to look at your day to day spending. Try to limit visits to the cash point, or keep a record of your switch/debit card transactions.
If you have a budget of £35 per week for food & housekeeping, £10 for meals at work and £25 per week for travel, try only withdrawing £70 for the week.

You may find that by having contact with actual cash, you are able to spend less than you normally would. So if you have £15 left at the end of the week, you could either have a guilt-free spend, or put it aside for later in the month or into savings.

Visit the Messageboards to share your budgeting experiences and give us your tips.