Step-by-Step Guide to Making a Budget

Ever find yourself getting to the end of the month and turning out your pockets wondering where all your money has gone? Knowing how to budget can help you feel more in control of your finances and make your money last.

Here’s a handy step-by-step guide to walk you through how to make a budget!

1. Work out your total monthly income

The first step in any budget is working out how much total money you have available to you each month.

This may consist of the occasional tenner that your granny insists you take whenever you see her, or the £5 you get for pocket money each week, or you might have a few different sources of income such as a job or a student loan.

No matter what your individual situation is, knowing what you have available each month is essential for making a budget as it allows you to start planning ahead with how you can afford to spend it.

If your income changes month to month, for example, you work on a freelance basis, try to estimate what your likely income will be. It may help to look at your last 3 months’ payslips to work out an average.

2. Work out what your fixed expenses are

Fixed expenses are things that you have to pay for each month which always cost the same.

This could be your rent, any bills you have such as a streaming subscription or your internet service, or any debt repayments due such as your student loan.

These expenses should be prioritised as they will likely be paid on the same day each month and if you haven’t budgeted to make sure you have enough money available on that day it could result in you having to pay an extra fee.

You should also account for any one-off expenses that you know are due that month, these could include things such as a TV licence or an MOT for your car.

3. Find your magic number

The magic number is what you have left after you take the figure in step 2 (your fixed expenses) and subtract it from the figure in step 1 (your total income).

What you have left is the money you can use on expenses which are variable, this means they are going to be different each month. This could include your food and any days out or other fun activities.

If you find that you are left with not enough to get you through the month, or your magic number is a minus, you should seek out support.

You can read our article about benefits that you may be able to access.

You can find debt-related information and support on the Citizens Advice Scotland website or by getting in touch with the National Debtline on 0808 808 4000 or by using their Webchat service.

4. Plan your spending

Now that you know your magic number, you have to make that last throughout the month.

Break down your spending into categories such as ‘food’, ‘travel’, ‘hobbies’ etc and set a budget for each of these to stick to. Prioritise the essential things such as food before you move on to the more fun things in life.

Once you have set your budgets, monitor them as the month goes on to make sure you are sticking to the plan. If any unforeseen costs come up, you may want to adjust your budgets to account for this so you don’t run out of money.

This is the part where you should also take into account your savings. If you can afford to put a little bit away each month, it can help you out in the long run. By saving, you can achieve a goal such as buying yourself something nice, getting a car or a house, or providing a safety net in case of emergencies when you have to pay for an unexpected cost.

Check out our TikTok on how to plan your budget.

We all know that feeling when your wallet is empty at the end of the month! Here’s how to budget and make your money last! 💷 #fyp #MoneyAndMe #Budget #Bills #Expenses #Scottish #YoungScot

♬ Fashionable and painful LO-FI instrument(1089786) – Syunsuke

Money Helper’s Budget Planner Tool

Now you know what you need to do you can grab a pen and paper, or open up an excel spreadsheet, and start budgeting!

However, you can also check out Money Helper’s Budget Planer Tool, a free online resource that will give you:

  •  a place to record all your spending, so you won’t forget anything
  •  a breakdown of your finances by category
  •  personalised tips when you’re all finished.

Iona Bain’s Top Budgeting Tips

Get more information about budgeting, saving and money management on our Money & Me page.

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