How to write a budget

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Take control of your money and find out what you’re spending it on every month. Here is how to draw up a budget to stay on top of your finances.

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Individual sitting down to write a budget to take control of his spending

Whether you’re strapped for cash at the end of the month or want to put more away for the future, a budget is an excellent way for you to work out where your money is going and regain control of your finances.

What is a budget?

A budget document details exactly how much money you have coming in each month – your income – and how much you have going out – your outgoings. It should include everything from your rent or mortgage to bills, food and transport. Take it right down to your daily coffee to make it as accurate as possible.

You might want to think of it a bit like a monthly spending plan.

Why budget?

A budget is vital if money is tight or you have debts to repay. This is because it helps you work out how much you can afford to spend each month. 

But even if you’re not worried about money, a budget can be helpful and informative. By showing exactly how much you have coming in and going out each month, it’s easy to see where you might be overspending and can help you free up more money to save.

This could make all the difference if you’ve got big financial goals like buying your first home or retiring early.

Tips for writing up your budget

Before you write your budget, use these tips to make sure you have everything you need:

  • Work out when bills go out: If most of your expenses go out monthly, calculate your income and expenditure as monthly figures

  • Get all your paperwork: Your bank statements can show you exactly how much you’re spending each month. In addition to illustrating what you’re paying on bills, it will also remind you of all those easily overlooked expenses, such as your Netflix subscription and pet insurance to takeaway coffees and Uber journeys.

  • Be as accurate as possible: If you have to estimate, it is better to overestimate your figures rather than underestimate them

  • Take your time: To make your budget as accurate as possible, you need to set aside time to write it so you can give it your full attention

  • Think about who the budget is for: If you live with a partner, you should work out a household budget together, taking in both sets of income and expenses.  

When you have everything you need, use our comprehensive budget spreadsheet to work out exactly how much you earn and what you spend.

Download our comprehensive budget planner spreadsheet

Tips for accurate  budgeting

Follow these steps when you fill out your budget to make sure your results are accurate:

  • Work out precisely what you earn: Use your payslips to enter your salary after tax, and include any second jobs you have. Don’t forget any benefits you receive.

  • Do not duplicate your outgoings: Be careful only to enter your bills once. For example, if you pay for your broadband, TV and home phone together, just enter the total cost.

  • Include one-off spending: You’ll also need to factor in enough spare money in your budget to cover ad hoc or one-off expenses. This might be to pay for birthday presents, cover holiday spending, or pay for Christmas. 

What do your results mean?

Once you have completed your budget should have two sets of figures - the amount you have coming in each month and the amount you have going out.

If you’re spending more than you are earning

If your outgoings are greater than your income, you are living beyond your means. This probably won’t come as a surprise as it’s likely you’re feeling strapped for cash in the run-up to payday or are regularly using credit cards or overdrafts. 

However, seeing the number in black and white can spur you into action, and the information shown in your budget helps you spot where you can make the cuts you’ll need to regain control of your finances.

Once you have been through our checklist and worked out how to curb your spending, recalculate your budget and see where you stand.

If you are earning more than you are spending

Congratulations! If you are spending less than you are earning, you are in a solid financial position, which means you will have money to spare at the end of the month. It’s still worth looking to see if there are any easy ways to save some money, though, particularly if you don’t have a big savings buffer. The process of writing a budget can be very enlightening, and you might be shocked by the amounts you are spending in certain areas.

Finally, rather than leaving your spare cash languishing in your current account, where it could easily get frittered away, think about how you could make that money work harder. You could:

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