Building a budget

Three stacks of coins, two pennies, twenty pennies and pound coins, with a calculator next to them.
A guide to help you build a budget that works for you. 

Whether you’re struggling with problem debt or not, building a budget is the first step to taking control of your finances. A balanced budget will help give you a clear picture of how much money you have coming in each month, what you’re spending and where you’re spending it. It can also help you with saving for the future.

Three steps to building a budget

  1. Start with your income. How much money do you have coming in?

  2. What’s your expenditure? How much are you spending and what are you spending it on?

  3. Balance your budget. Work out if you’re spending more than you have coming in and see where you could make changes.


It can be helpful to use a spreadsheet tool on your computer to keep track of all your information.

Start with your income

Write down how much money you have coming in each month, including:

  • Wages

  • Benefits

  • Pensions

  • Gifts from friends and family

  • Income from lodgers/property/non-dependents

You might want to look at past bank statements to help with this. Remember to include any one-off income that you might receive over the course of a year, but not necessarily every month. For irregular income, work out how much you receive in a year and divide it by twelve to get the monthly amount.

What’s your expenditure?

Next, you need to figure out what you spend your money on. Go through your bank statements and break down your spending into categories:

  • Home costs, such as rent/​mortgage payments, household bills such as gas, electricity and water, and building/​contents insurance.

  • Living costs, such as food, clothing and health care.

  • Travel and vehicle expenses, including fuel, maintenance such as your annual MOT and repairs, road tax and insurance, and public transport costs.

  • Costs related to family and pets, such as vet bills, pet insurance, childcare, pocket money and school trips.

  • Leisure, including meals out, hobbies and subscriptions.

  • Future needs, such as birthdays, Christmas, holidays, home improvements, pension, investments and life insurance.

  • Giving, such as charitable donations.

  • Debt repayments, including personal loans and hire purchases.

Again, remember to think about your expenditure across the whole year. Christmas, for example, only comes round once a year but can be an expensive time, and so it’s important to factor it into your monthly budget. Divide the amount you spend by twelve to get a monthly amount (e.g. if you spend £200 on Christmas, this would be about £16.75 per month).


Multiply weekly expenses by 4.33 to get a monthly total.

Balance your budget

Knowing where your money is going is a great start, but balancing your budget is the most important part of this process. With all your expenditure totted up, is it more than your total income?

If so, there are a few things you can do to balance your budget.

Needs and wants

Look back over the things you listed in your expenditure. Colour code anything that is a want’ in one colour and anything that is a need’ in another colour. Needs’ are things you realistically can’t live without, such as food and paying your rent. Wants’ are things that you enjoy but aren’t essential, such as meals out or TV streaming subscriptions.

Are there any areas where you could cut costs, cut back or cut out?

  • Cut costs means finding a way to do something cheaper, such as switching to a different internet provider or trying different brands of a product in the supermarket.

  • Cut back means doing something less, such as taking a packed lunch to work rather than buying lunch out.

  • Cut out means getting rid of something altogether, such as cancelling memberships and subscriptions that you no longer use.

This isn’t about cutting out all the things that bring you joy. It’s okay to compromise so that you can still have a few luxuries. What’s most important is being honest with yourself about what you can realistically achieve with your money.

Increasing your income

Although it may not be easy, it’s worth considering if you could increase your income to help balance your budget. This might look like:

  • Working extra hours, or seeing if someone else in your household can do so.

  • Making sure you’re receiving all the benefits you’re entitled to (use a benefit calculator to help you with this).

  • Asking grown-up children who still live at home to contribute to household costs.

  • Renting out a spare room to a lodger (make sure you check the terms and conditions of your accommodation before you do this).

  • Renting out a parking space or driveway.

  • Selling things you no longer need, such as old clothes or jewellery.

Get free, expert support in your local community

The information on this page is taken from our money coaching workshops. The course is run in partnership with local churches across the UK and is designed to help people take control of their money through practical financial education and holistic support tailored to their individual needs. First launched in 2008, money coaching has helped thousands of people to budget, save and spend better.

More helpful resources

Money Helper’s Budget Planner lets you build your budget step-by-step, and you can save it to access whenever you want.

Turn2Us lets you check your benefit entitlement and find out what other financial advice and support is available.

Martin Lewis’ Money Saving Expert offers lots of tips and tricks for cutting costs and saving money in your everyday life.

What if I can’t balance my budget?

During the cost of living crisis, it might not be possible to balance your budget. Rising rent, fuel, gas and electricity and food bills mean that making it to the end of the month without running out of money could get more and more unlikely. If you’re struggling, look at our cost of living crisis resources and find out what extra help could be available to you.

You could be also entitled to benefits you don’t know about. Use the free Turn2us benefits calculator to check if you’re missing out on important financial support.