Simple steps to learn how to budget money

To learn how to budget money, we need to go back to basics. It's not hard, but sorting out your finances takes time.

You need to fully understand where you're spending your money, how much you're spending and how much money you're bringing in.

Once you've got a grip on those three things, you can start to play with your budget to make life easier. This allows you take complete control over your spending and your future.

This section is all about how to budget. You'll learn the simple steps in setting up a budget, understanding where your money goes and how to keep hold of it.

For now, let's focus on where to start with the basics.

Articles on how to budget

How to budget money: part one
Learn four simple steps will show you where to start when setting up a budget from scratch, including details about monthly income and outgoings. Part one covers understanding your incomings and outgoings.

How to budget money: part two
Part two covers reviewing and revising your budget along with how to actually live within your means.

Making a budget work for you
Discover ways of making a budget work for you. Drastic changes or small steps?

Envelope budgeting
Perfect for those who use cash, envelope budgeting is a tried and tested, old fashioned way to budgeting success.

Zero based budgeting made easy
Zero based budgeting makes your budget work really hard by investing all spare money back into the budget. Find out how it can work for you.

Teaching money to our kids
Teaching your kids about money doesn't have to be hard if you use some of these great ideas.

Living on a student budget
Whilst at university it can be tough to make ends meet, but living on a student budget is something we all have had to do. Check out these tips for keeping your student budget in check.

How to make a budget and stick to it
Sticking to a budget is definitely the hardest part when learning how to make a budget, but there are lots of little tricks you can use to help yourself stay on track financially.

How to create a budget for an event
Learning how to create a budget for an event is a little different from learning to create a monthly home budget. Here is some advice on how it can be done.

Setting up a budget - Things that easily get forgotten
When you’re setting up a budget, it’s important to be thorough. There are a few small things you might forget, though.

A simple budget as an example
Budgeting doesn’t have to be complicated. If you’re a little afraid of what your budget needs to look like, this simple budget and guidance can help you get started.

Budget variance - What to do about it
Budget variance is when there is a difference between what you set out to spend and what you actually do spend in any given month. Learning how to deal with such variance is vital for making your budget a success.

How to budget: part one

To learn how to budget money, we need to go back to basics. It’s not hard, but sorting out your finances takes time. You need to fully understand how much you’re spending and how much money you’re bringing in. This article is all about these basics and once you’ve completed the four steps, you’ll know how to budget money.

The steps below are a basic outline of how you should start to budget. Within this site, there are many more in-depth articles on how to budget money and tools for budgeting, including sample budgets, budget worksheets and budgeting tips.

For now, let's focus on where to start.

Budgeting on a monthly basis

Most people budget on a monthly basis because most of the major expenses such as mortgage or rent and other household bills occur on a monthly basis. This also ties in with salaries, however not everyone gets paid monthly. If you get paid weekly, multiply your weekly pay by 52 for the number of weeks in the year and then divide by 12 to get a monthly amount. Now, on to the four simple steps.

Step 1: Work out your monthly income

Start off by making a note of any income you receive within the month. You should include everything from your pay cheque to any benefits you receive - anything that comes into your bank account within the month.

If you're not sure how much this is, then look at your old bank statements. You'll get a better idea of exactly how much comes in. Items you could include would be:

• Pay cheque
• Benefits (child benefit, family tax credit, etc)
• Maintenance
• Additional cash payments from family or lodgers
• Other forms of income (rented houses or land)

If your pay cheque changes each month, then just take an average amount. This can be done by adding several months together then dividing by the number of months. For example:

• John gets paid £1,640 in January
• John gets paid £1,820 in February
• John gets paid £2,200 in March
• His average monthly pay check would be £1887 (rounded up)

If you have two incomes within your household and you're doing a family household budget, then include both incomes in your monthly budget.

Step 2: Work out all your expenses

When you learn how to budget money, it's really important to look at where your money is going. We all know that we have the mortgage or rent to pay, along with council tax, water, gas and electricity and phone bill. These are regular payments, but what about all the other things.

I remember as a young girl going to town on a Saturday to go to the shops. I had a £30 allowance for the month (that shows my age) and would spend it on various bits and pieces. When I got home, I was always amazed to find that I didn't have much money left. I could never work out where or what I'd spent my money on. I'd just frittered it away. It's that sense of loss of money, which has always made me be very careful with my cash. I want to know where it's going and who is getting what!

It's easy to forget where our money goes. A few pounds here, and a few pounds there, but it soon mounts up. A really great exercise is to write down everything you spend for a month. We're working with a monthly budget, so it's best to do the following exercise for a month.

Continue to part two on reviewing and revising your budget.

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