Use this guide if you are not sure where your money goes each month or you want a clear plan before payday. Have your last two or three months of bank statements, payslips or income records, and a spreadsheet or sheet of paper ready.
Step by step
List all your income
Write down every regular amount that comes in after tax, including wages, self-employed income, benefits and any regular support. If your income varies, use the lowest typical month rather than the average. This gives you a safe starting figure.
List fixed bills
Add everything that goes out at a set amount each month, such as rent or mortgage, council tax, energy, water, phone, broadband, insurance and loan repayments. Use your bank statements to find direct debits and standing orders. Include yearly costs such as a TV licence or car insurance divided by twelve.
Estimate flexible spending
Go through recent statements and total what you spend on food, travel, fuel, clothes, eating out and other day-to-day costs. Group them into a few simple categories. Be honest, as an unrealistic budget is quickly abandoned.
Find the gap
Subtract fixed bills and flexible spending from your income. If the figure is positive, decide how much goes to savings or paying off debt. If it is negative, you now know how much you need to cut or earn to balance the month.
Make adjustments
Look first at flexible spending and subscriptions you no longer use. Check whether you could switch to a cheaper tariff for energy, broadband or insurance. If the gap is large or you are behind on bills, speak to a free debt adviser at Citizens Advice, StepChange or National Debtline.
Review each payday
Spend ten minutes on payday updating the sheet with real figures from the last month. Adjust categories that were consistently over or under. Keep old versions so you can see progress over time.
Ready-to-use checklist
- Two to three months of statements
- All income listed after tax
- Fixed bills and direct debits listed
- Yearly costs divided by twelve
- Flexible spending grouped
- Monthly surplus or shortfall worked out
- Savings or debt payment amount set
- Payday review reminder set
Practical tips
- MoneyHelper offers a free budget planner if you prefer a ready-made tool.
- Move savings out automatically on payday so you do not have to rely on willpower.
- Keep a small line for irregular costs such as birthdays, car repairs and school trips.
Common problems
My income changes every month and a budget feels impossible.
Base your budget on your lowest typical month and treat anything extra as a bonus for savings or debt. Keep a separate buffer to smooth out lean months. Review monthly rather than weekly so short swings do not throw you off.
The sheet shows I spend more than I earn every month.
Start with priority bills such as housing, council tax and energy, and cut non-essential spending first. Check whether you are entitled to benefits or discounts using an independent benefits calculator listed on GOV.UK. If you are falling behind, get free help from a debt adviser quickly.
I keep forgetting to track spending.
Rely on your bank statements or banking app instead of recording each purchase. Many banking apps categorise spending automatically. A short review on payday is enough to keep the budget accurate.