A guide to making the most of your money
Budgeting is a great way to stay on top of your finances. By keeping track of how much money you have coming in (your income) and how much money you have going out (your spending) you can get a clear picture of your finances and take control of your money.
You can navigate through the guide using the table of contents, or if you'd like to read the guide end-to-end in full, you can download the PDF.
- Why budget?
- Ways to increase your income
- Drawing up a budget
- Ways to cut your spending
- If your circumstances change
- Money saving tips
- Useful websites
Budgeting can help you:
- see exactly where your money goes
- spot overspending or when you’re paying for things you no longer need or use
- live within your means: you can adjust your spending to ensure you don’t get into debt
- work out what you can afford
- plan for big expenses such as Christmas, holidays and annual bills
- save for the future
You can create a budget using pen and paper, a spreadsheet or with the help of an online budget planner. Budgeting can be harder if you have an income that varies - for example, if you're on a zero-hours contract, are self-employed or on certain benefits. Get tips on how to budget if your income goes up and down.
There are various ways you may be able to boost your income.
- If you’re working you may be able to increase your hours or pick up some overtime. If you’re not working you may be able to get a part-time job.
- Check you’re claiming any benefits or other financial help you’re entitled to. If you’re on a low income you may be entitled to some form of income support or help with your housing costs. If you care for someone, are in poor health or your household changes (e.g. someone moves out or dies) you may be entitled to other benefits. To find out more about benefits and check your benefit entitlements use one of the government's benefits calculators.
- If you have a spare room in your home or a garage you may be able to rent this out. You can earn up to £7,500 in rent before you have to pay tax on this money. Find more about the government’s rent a room scheme.
Gather together useful information: Include details of any income you receive (salary, pension, benefit payments and income from savings and investments), as well as household bills, food bills, credit card statements, insurance costs and so on.
Identify all your income: This is money you regularly receive. Work out your total income after tax to see how much you actually have to spend. If you receive any irregular or unpredictable income such as over-time or gifts from family, think carefully before including it in your budget as you cannot rely on it. It may be better to earmark it for other purposes.
Work out your spending: Make a list of everything you spend. As well as regular spending, include occasional spending such as for Christmas, holidays and visits to the hairdresser. Work out how much you spend on these each year and then calculate how much you need to set aside for these.
Take your spending away from your income: If you have a surplus each month, that’s good news. But if your spending is higher than your income, you need to take action. If you allow this to continue you’ll find yourself eating into any savings you have and even borrowing just to make ends meet.
If you can’t increase your income you may be able to cut your spending.
- Check your budget for any over or unnecessary spending.
- Divide up your spending into needs and wants. Needs are things you have to pay for such as rent and food, wants are things you could do without at a push. Once you’ve worked out your essential spending (your needs) you can then see
how much cash you have left for other things (your wants).
It’s a good idea to regularly review your budget as your income and spending patterns can change. You may also find that prices go up which affects how much spare cash you have.
Your circumstances might change if someone moves in or out of your household, you cut your working hours or stop work altogether, your health deteriorates, you start to receive extra income such as the State Pension or a private pension.
- Energy Saving Trust - Cutting energy bills
- Money and Pensions Service - Cutting costs
- Which? - 50 ways to save money
You can find more on budgeting at:
You can find budget planners at:
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