Preparing a Personal Budget

Here's some advice on how you can prepare a personal budget. It might involve a lot of columns and keeping track, but it's definitely worth doing!

Why Budget?

Budgeting gives you an accurate picture of your finances. It can show you where your money is going, and how much you're spending on what. A lot of times the little things we spend money on really add up, and we don't even notice. A can of Coke a day? That can add up to over £18 a month! A weekly magazine? Another £8-10 a month.

TOP TIP

CUT-BACK CALCULATOR

Identify a non-essential  item or expense, cut-it out for a day, a week or even a month and see how much you could save!

Budgeting can show you where your spending habits and your expenses aren't matching up, and possibly where savings can be made.

Before you start worrying about spreadsheets and notebooks, try one of the online budgeting tools we've got linked on the right - just put in what you spend and see where you're going wrong, and where you're going right.  If you want to make your own budget, follow the tips below.

Step 1 - Start with a realistic view 

Keep a record of everything you spend over a certain amount of time - a week is good, but a month will give you a better idea. Write down everything. If you don't want to write it down right away, keep hold of receipts and put them down once you get home.

You might have some expenses that only show up every few months - make a note of these, and how often they occur each year. Then divide them into monthly installments. For example, if you pay £40 every two months for dance classes, that would work out to £20 a month. If you pay for your bus pass every three months, divide the amount you pay by three and write it down in your monthly budget.

Be honest with your figures. If you're embarrassed about how much you spend on something, write it down anyway. It makes it that much better when you make positive changes and start noticing a difference.

Step 2 - Keep track of what you get as well

As well as keeping track of what you spend, you need to know what you have coming in. Note down any money you get from a job, from your parents, or as presents. You may also get some benefits, from an educational maintenance allowance or something like that.

Step 3 - Making a budget

The best way to do this is to make one list of how much money you earn each month, and another of what you need to spend it on. Make a reasonable figure based on how much you spend each month and how much you can afford to spend each month.

Include things like the following:

• Mobile telephone costs (contract or pay as you go
• transportation
• food and drink
• toiletries or cosmetics
• any courses, classes, or memberships
• magazines or newspapers
• books, cds, and dvds
• entertainment - cinema, going out with friends, etc
• gifts - birthdays, holidays, and other presents that might come up

Then have columns for each month, and at the end of the month write down what you actually spent in each area. Some might be more than you'd allowed, and some might be less, but hopefully it will balance out.

Step 4 - Go back over your budget

Look back over your budget every month and see what areas you are overspending in and what needs adjusting. This is a good opportunity to see if you can afford to save any money too.

Last modified: 10/06/2010 12:29:26