Do you know how to budget?

Well do you?? Do you know how to manage your money? Compare the incoming to the outgoings?

Yes – then well done I hope you are coping well. I hope you’ll carry on reading though, maybe you do it differently.

NO – then read on and hopefully my tips and advice will help you.

Background to the way I budget

About 25 years ago I had a friend who always seemed to have a little money to spare.  We had taken our children to the park and she asked if hubby and I would like to go out for a meal with her and her hubby. I had to said no as the mortgage was due to be paid the same week. She couldn’t understand why I didn’t put money away each week for bills as that was what they did.
We went back to her house and she explained how they balanced the books.  It was just so obvious once she explained it!

First steps

  • Get the past 12 months bank statements out. If you do paperless banking download them from your online banking access.
  • Make a list of all your bills and regular payments.  Write down on a pad at first.
  • Go through the statements looking for payments you’ve missed. Don’t forget some things are paid quarterly or yearly.
  • Go down your list working out how much you pay each one for the whole 12 months.
  • Write the total next to each item on your list.
  • Double check again for any missed payments – perhaps there is something you pay by cash regularly. Write down any thing else you find.
  • If you are not familiar with Microsoft Excel or any other spreadsheet software keep using your handwritten notes.
  • If you are familiar with Microsoft Excel or other spreadsheet software, transfer all the data to a spreadsheet.  (see below)
  • Feel free to add anything to the list. You may want to add credit card payments, loans and petrol costs too.


  • Add up the totals into one grand total.
  • If you are paid weekly divide the total by 52.
  • If you are paid monthly divide by 12.
  • The divided total is the money you need before you think about food, clothing, entertainment etc.
  • The list (if in excel) should look something like this:  (Your list will have different items and sums on it of course!)
Mortgage 6000
Electric 700
Gas 650
Phone 120
Mobile 150
Broadband 240
Contents Insurance 300
Bulidings Insurance 300
Council Tax 2000
Water bill 500
TV Licence 100
Satellite TV 400
Car Insurance 350
Car Tax 160
Car Servicing 200
Dentist 100
Central Heating cover 200
RAC 100
White Goods Insurance 150
TOTAL 12720
Weekly 244.61
Monthly 1060

Quite a shock isn’t it!!

On to the income

The next step is to work out how much you have coming in.

  • Make another list with all your income streams on it, wages, child benefit, other benefits, tax credits etc.
  • If you are paid weekly work out how much you get weekly and likewise do the same if you are paid monthly.

So now you know the 2 totals you will have an idea of how much you need to put aside for essential bills. The money left is what you have for food, clothing, entertainment etc.

my wages 1000
his wages 1500
child benefit
tax credit
TOTAL 2500
Essential bills 1060
Money left 1440

Putting essential money aside

  • Open a separate bank account
  • Arrange the transfer of Direct Debits, Standing Orders to this account.
  • Set up a standing order to transfer the weekly or monthly essential bill money to this new account. Set it up for the day or so after you are paid. If the weekly or monthly total is an odd sum as it is in my table above, round-up the sum – for example £250 week and £1200 a month.

You are now set up with your budget.

The money left each week or month is for the day-to-day living costs.  Hopefully you’ll have enough to put some aside for savings too.

This sounds like quite a long-winded way of doing things but it really doesn’t take long and you will reap the benefits. All you have to do after the first time is to review it monthly to ensure you have sufficient balance, then do the budget again 12 months later.

Before I did this we had no budget and just lived week by week and were often overdrawn and using our overdraft but within a month or so we never went went overdrawn again and never used the overdraft from that day to this.

I hope you find this useful and I welcome any comments you may like to add.


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3 comments on “Do you know how to budget?

  1. Great post on budgeting, its always good to have at least some past record of your spending whether its bank summaries or random receipts lying around. Also, if credit cards are used with responsibility its a great way to track spending and its even easier to export it into the excel budget.

  2. Jenny paulin says:

    Such an informative post. You want know, but I had to go bankrupt two years ago because among other things I lived above my income for too many years! This is such great but practical advice and thank you for sharing it x

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