Money Advice

How to budget and stay on top of your family finances

However much money you have right now, a budget can make it go further! A money plan can even leave you better off and less stressed – and you don’t need to be a maths wiz to make one.

At its simplest, a budget is just a record of how much money you have coming in and going out. What makes them brilliant, however, is that even a basic budget can help you and your family:

  • make the most of the money you’ve got
  • be better off in the future
  • cope with unexpected costs
  • feel more confident about managing your cash.

Budgeting works for everyone. Whether you’re feeling flush, struggling to get by, or just don’t know how to take control of your finances, a money plan can help you move forward.

What can I use to make my budget?

Use whatever you feel comfortable with: a piece of paper and a calculator, your computer’s spreadsheet programme, or a budgeting app. The Money Advice Service also has a detailed online budget planner which can do all the sums for you.

How do I make a budget?

The best place to start is with a warts-and-all look at your finances. It’s fine to estimate figures, but digging out receipts, bank statements, bills and payslips can help fine-tune the details. Either way, make a list of:

A. Your total monthly income

This might include wages, benefits, child maintenance, maternity or sick pay, money from savings/ pension, or anything else that gives you regular income. If you get any paid as lump sums, it’s worth splitting these into their monthly equivalents, too.

B. Your total monthly outgoings

Essential spending

These are your fixed or priority payments. They’re often paid by standing order or direct debit, and missing them can mean expensive or stressful penalties. Your essential costs might include: rent or mortgage, insurance, utility bills, or repayments towards a loan or credit card.

Flexible spending

Payments that can flex around your circumstances from month to month: groceries, clothing, regular home maintenance, childcare, entertainment or eating out, gym memberships and magazine subscriptions.

Whether something counts as essential or flexible spending is down to what’s right for you and your family. Either way, aim to be ruthlessly honest and write down all your spending!

Putting your budget to work

Once you’ve listed everything you can think of, take a moment to add up your monthly income and outgoings.

Ideally, you’ll bring in enough money each month to cover your spending, with a little leftover for a rainy day, treats or emergencies. In reality, most of us don’t quite have enough, or we cut it very close! If that rings true for you, it’s worth asking two questions before borrowing to get by:

Could you increase your income?

  • Are there benefits or financial support you’re entitled to but aren’t claiming? The turn2us website has a benefits checker and grants tool that can help you find funds.
  • Could you or your partner get extra shifts or negotiate a better wage?
  • Could you make money from home? i.e., letting out a spare room, selling things you don’t need / have won / have made, or from completing jobs, tasks or surveys online.

Where can you spend less?

  • If you’re spending money on things you can live without, cut them out entirely or find free alternatives. Your budget can help you identify unnecessary money suckers!
  • Get in the habit of comparing prices on everything, from mortgage deals or rent to groceries and bills – then try to get a better deal each time. Voucher codes, discounts and offers, especially online, can save you cash on family activities, too.

How can I use a budget to stay on track?

A good rule of thumb is to allocate your income to your essential and most important costs as a priority: put the money aside or pay those bills first.

Whatever’s left will have to last you for the rest of the month – so it means being organised!

  • After paying essential costs, split your spending money into weekly amounts. It’s easier to manage smaller amounts, plus you’ll be more aware when it’s running low.
  • Use a notebook to log your daily spending. Keeping a running total can help you stick to your allowance, and makes it easier to spot patterns (such as emotional spending) or opportunities to save – for instance, taking your own snacks on outings, instead of buying them.

Can a budget help me cope with emergencies?

A budget can help you stay on top of the money you have – but think of it as a useful tool, not a magic pot! There will always be times when unemployment, emergencies or broken boilers land out of the blue: the key is to use your budget to protect yourself as much as possible.

One way is to save money each month towards big bills, planned purchases or unexpected costs. Put aside even £10 every month for Christmas, for example, and you won’t be left scrambling to find lots of cash all in one go in December. The same is true for holiday funds, emergency repairs, a new car, or even treats.

If the worst happens, your budget can also help you spot where you can adjust your spending to find extra cash if you need to. It all helps you get back on your feet faster.

How can a budget make my family better off?

Budgeting helps you live within your means, avoid unnecessary spending, and manage your financial commitments, all of which can leave you with more cash. Watching how you spend, save, or plan for the future is a great way for children to start learning money skills at home, too.

What about the bigger picture? You might want to support your children when they go to university, or dream of starting your own business or buying a bigger home. Wherever you want to be a year or two from now, your budget can help you identify how much money you can spare each month (or how much extra you need) to get there.

Whether it’s for treats, investments or emergencies, it’s worth picking one or two money goals and making them part of your monthly essential spending. Saving up in advance often works out cheaper than buying on credit, too, so more of your money goes towards the things you really want. It takes patience, but squirrelling a bit away every month is the simplest way to build a nest egg – and having funds of your own gives you more freedom to spend it how you like.

How often should I update my budget?

The more often you keep an eye on your money, the more say you have about where it goes! Updating your budget once a month –  and keeping daily tabs on your spending – is ideal. Ultimately, stick with whatever works for you.

Trusted resource

Set up by the government, the Money Advice Service offers free and impartial guidance on everything from work and benefits to disability and retirement.


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