Most people know they should have a budget. Far fewer actually have one — usually because it feels like a bigger job than it is. But the truth is, having a budget is one of the most useful things you can do for your finances, whatever your situation.
It doesn't need to be complicated, and it doesn't need to take long. Give it a week, follow the steps below, and by the end of it you'll have a clear picture of what's coming in, what's going out, and what to do about it.
Here's how to do it, step by step.
It can feel daunting to get started, but knowing what you’re working with before you build a budget makes everything else easier. Set aside half an hour today to dig out your recent bank statements, payslips, and any bills you pay regularly. If you share finances with a partner, it's worth doing this together so you get a complete picture of your household income and spending.
Can't find the paperwork? Most of it will be available online through your bank or provider.
Now list all the money coming into your household each month, using your take-home figures after tax. Don't forget anything beyond your main wage — benefits, a pension, income from a lodger, regular payments from a partner. Add it all up to get your total monthly income.
If your earnings vary month to month, you'll want to revisit your budget regularly rather than setting it once and leaving it.
Day 3 is where most people get a surprise. Go through your bank statements and write down everything you spend in a month — the regular stuff like rent, Direct Debits, and subscriptions will jump out straight away. Most banking apps now categorise your spending automatically, so you can see at a glance what's going on travel, groceries, entertainment, and so on — that can save a lot of digging.
It's the irregular costs that tend to catch people out: haircuts, prescriptions, birthdays, Christmas. For those, add up the yearly total and divide by 12 to get a rough monthly figure. If you're working from estimates for anything, always round up rather than down — it's better to budget for the worst case than be caught short.
If you want a ready-made structure to fill in, StepChange has a free income and expenditure form that does the hard work for you.
This is where everything should start to come together. Subtract your total outgoings from your total income. If there's money left over, you can start thinking about what to do with it — building savings, paying down debt, or simply giving yourself a bit more breathing room.
If you find you're spending more than you're bringing in, don't worry — that's exactly what a budget is for. It shows you where the money is going so you can decide what to change.
💡Always prioritise your essential bills first. Things like your rent or mortgage, council tax, and energy bills need to come before anything else, because the consequences of missing them can be serious.
Now you've got the full picture, have a look for the obvious places to save. Forgotten subscriptions, non-essentials that have quietly crept up, utility bills you haven't reviewed in a while — these are your quick wins. Switching providers or haggling for a better deal can make a real difference, on everything from broadband to car insurance.
If you're struggling to make ends meet and aren't sure where to start, organisations like StepChange and Citizens Advice offer free, non-judgmental support. They can go through your budget with you and help you find a way forward.
Here's a trick that makes budgeting much easier to stick to. Once you know what you need each month, divide your money into separate pots for different purposes — bills, groceries, savings, a little for treats. This is sometimes called jam-jar budgeting, and it's one of the simplest ways to stop money disappearing without you quite knowing where it went.
Many banks now let you create savings pots or spaces within your account, which makes this easier than ever. When the bill money is set aside, you're not accidentally spending it on something else.
If you want to take things a step further, zero-based budgeting is worth a look — it's a method where every pound you earn is given a specific job before the month begins.
The last day isn't really a task — it's more of a mindset shift. A budget isn't something you set once and forget. Life changes, costs go up, and unexpected things happen. Getting into the habit of checking your spending regularly — even just a quick look at your banking app once a week — means you can catch problems early rather than reaching the end of the month wondering where it all went.
If you can, build a small emergency fund into your budget too. It doesn't need to be much to start with — even a modest cushion means you're less likely to need to borrow if something comes up out of the blue.
The hardest part is starting — and you've just done that. A week from now, you'll know exactly where your money is going.
Disclaimer: We make every effort to ensure content is correct when published. Information on this website doesn't constitute financial advice, and we aren't responsible for the content of any external sites.
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
