A budget can help you see what money you have coming in and going out every month – so you can get a clear picture of your finances. 

Why budget? 

A budget is not just for reducing debt. It can help you save, manage your money and plan for things like investments or taking out credit.

The aim of a budget isn’t to restrict your spending, but to help you make the most of your money.  

What money do you have coming in?

Start by listing all the money you receive. So that could include: 

  • Wages from your job or income from self-employment.
  • Benefits, like disability allowances, tax credits or universal credit.
  • Investment income. This could be money from savings, investments or property. 
  • Pensions.
  • Gifts and inheritance. 

What money do you have going out?

Take into account things like: 

  • Your rent or mortgage. Include any service charges, ground rent and site fees.
  • Household bills. This could include utility bills like council tax, TV Licence, streaming subscriptions, water, gas, electricity, phone and internet, as well as things like home and pet insurance.
  • Debt repayments. Are you paying off credit cards, loans, car finance or store credit? 
  • Travel costs. This could be your car costs like fuel, tax, tyres and insurance, or what you spend on using public transport.
  • Living expenses. What do spend on food, toiletries and clothes? 
  • Healthcare. Perhaps you have regular prescriptions or healthcare appointments.  
  • Care costs. Any care expenses, such as child care, nursing costs or care homes, or child maintenance payments.
  • The fun stuff. The money left over for things you enjoy, anything from going out for dinner or to the gym or funding your hobbies.  

Less frequent costs

Things like your car MOT, passes for entertainment attractions, public transport passes and some insurance policy renewals only happen once a year, or once in a while. You might also buy birthday gifts and seasonal clothes a few times a year.

Savings & Investments. Money you put aside to cover those one-off costs for something unexpected, like a boiler or car repair, or money you invest.

Unexpected costs?

Plus, it's worth thinking about the one-off costs that could come from something unexpected, like a boiler or car repair.

Review your budget

Once you’ve made a budget, it can help to check it regularly. You might want to update it if:  

  • Your income has changed. Has it gone up or down?
  • You have more or less money going out of your account. Have you got any additional or fewer expenses?
  • You’ve paid off any debt. This could free up money to save.
  • You have future expenses. Are there any large purchases coming up? 


Have you started saving? It’s never too soon to start. 

Things you might want to save for could include: 

  • A holiday. Save for a fund to help pay for transport, accommodation, travel insurance, food and activities. 
  • A house deposit. You might want to save to get on the property ladder.  
  • An important life event. A wedding, starting university, an important birthday or anniversary. 
  • Rainy day savings. Money to buffer any unexpected costs.  
  • A fund for you. You could set up a savings fund to buy the things you really want. That could be anything from dining out and activities to a new bike or games console. 

Live within your means

When you live within your means, your outgoings are not higher than your income.

A budget can help you to plan your monthly spend and stay on track. If you’re worried about money, or have been told you're in persistent debt, speak to someone. 

Money worries

Existing debts

If you have lots of different types of credit or debt, it can be confusing. Different rates of interest, and varying charges and fees can apply across different types of credit, for example credit cards and personal loans.

One way to manage lots of debts is to consolidate your debt into one monthly payment. 

How to consolidate debt

Build a savings habit

Want to start saving more? Reviewing your spending and budgeting could help. Try: 

  • Price comparisons. When something like insurance or a phone contract comes up for renewal, compare different providers and see if you could get a better deal. 
  • Something different. It’s easy to get into a habit of buying the same things. Perhaps you can find some of your everyday essentials elsewhere, cheaper. Or maybe try something new.  
  • Review your outgoings. Is there anywhere you can cut-back and make some savings? 

Applying for credit

If you’re applying for credit, consider whether you can afford the monthly repayments. Would you be able to keep up your repayments if the cost of living increased or anything unexpected happened? 

Lenders will look at several factors when making a decision. These could include:

  • Your affordability. What you can afford to repay based on what you earn and spend, and any existing debt. 
  • Your details. Personal information, such as your address and employment status. 
  • Your account history. Lenders may have records of previous accounts that you’ve held with them.

4 ways to manage credit

  1. Only borrow what you can comfortably afford to repay. 
  2. Get the full picture of fees and charges, so you know exactly how much you can expect to pay.
  3. Avoid late payment fees by paying on time. 
  4. Pay off your balance in good time. Remember that some agreements have early repayment fees.


Help to manage a credit card

A quick recap 

Here’s what you’ve learnt about knowing your affordability: 

  • A budget can help you take control of your finances. 
  • List your incomings and outgoings to help you get a clear picture.  
  • One of the ways to reduce multiple debt repayments is by consolidating your debt
  • Lenders will check certain things about you and your history of borrowing. 

Keep reading

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