3 steps to building a budget that works
When you come to us for debt advice, we will work out a budget with you. And you can get started by filling out our ‘income and expenditure statement’.
Step 1. Work out your total income
Add together all the income you get each month. This means your:
Add the amounts you get in your pocket, after tax has been taken out.
You can check what you get in your bank statements or any letters you have.
How do I make this into a monthly income?
I am paid weekly:
- Multiply it by 52
- Then divide it by 12
So, if you are paid £500 a week.
- This would be: 500 x 52 = 26,000
- Then 26,000 ÷ 12
- That works out as £2,167 per month
I get different wages each month:
If you have all your monthly income for the last year:
- Add it all together
- Then divide it by 12
If you only have the last three months:
- Add these three months together
- Then times by four
- And divide that by 12
Step 2. Make a list of everything you spend each month
1. Start with your most important bills
These are the things you must spend money on. Such as:
- Mortgage or rent
- Council tax
- Gas, electricity and water
These are your 'priority bills'. Find out more about what bills to pay first.
2. Next, write down what you usually spend on living costs
These are things like:
Look through recent bank statements. Round them up to make sure you are being fair about what you need to spend. It may help to write down everything you buy over a month.
3. You need to include things you pay for less often
These are things like:
- Christmas
- Birthdays
- Holidays
- Car repairs
- Vet's bills
To work out how much you need to put aside each month to cover all of these:
- Add the cost for all these together – to get a total for the year
- Divide that total by 12 to get a monthly cost
Step 3: Take away what you spend from your income
- Any money left after everything is paid for is called a ‘budget surplus’
- If you spend more than you have coming in you have a 'budget deficit'