The basics of budgeting does not necessarily just mean cutting back but actually also about looking at what income you have coming in, what bills and other expenses you pay out and then allocating money to the various purposes.
So let’s take a closer look at the basics of budgeting and where to start.
Your income is the total sum of whatever money you have coming in each week or month. That may include salary or wages, tax credit, child benefit, maintenance or other payments. It is often easier to work this out on a monthly basis, so add everything up.
At this point list everything that you pay out. Even things that maybe you want to stop or change, just list all the bills, payments and other money you spend each month with the name that describes the payment and the amount. Then total it up each month.
The best place to start with setting a budget is to separate each of your bills or payments – so household bills like your mortgage, rent, electricity, gas, phone and necessary household bills each month. Go through each one and look at whether you could be saving money, for example taking out a new gas or electric contract or getting a better deal on your house insurance. Once you have these figures then set a budget amount for household.
Next go to your weekly food shopping and set a monthly budget amount for groceries.
Do the same for travel and fuel and so on until you have a list of budget categories and amounts next to each. You may be able to budget for less or more depending on what is important to you.
By working through each one you can start to see where you could save money and perhaps where you could put more money. For example you might be able to save money on household bills and put more in your budget for saving.
The Basics of Budgeting
The Money Advice Service have several resources you can look at for living on a budget and the basics of budgeting.