Personal budget
A personal budget is a statement clearly showing what money you have coming into the household and what money you have to spend.This is also called an Income and Expenditure
.The personal budget will help you to work out:
- how much money is coming into your household (known as income)
- how you are spending your money (known as outgoings or expenditure)
- where you can make cutbacks
- work out what money is left
- work out how much you can afford to offer to your creditors
- plan for the future
Weekly or monthly figures
When completing a budget, you should decide whether a weekly or monthly budget is most appropriate for you. You should not mix the two. As a rule, if you regularly receive money on a weekly basis, you should calculate a weekly budget. This means you may need to re-calculate some of your income or outgoings to make them all the same:
To calculate weekly to monthly – use your weekly figure x 52 (weeks) divided by 12 (months).
To calculate monthly to weekly – use your monthly figure x 12 (months) divided by 52 (weeks)
To calculate fortnightly to monthly –use fortnightly figure x 26 (periods) divided by 12 (months)
To calculate four-weekly to monthly use four weekly figure x 13 (periods) divided by 12 (months)
What should be counted as income
Income is any money coming into the household. This could be made up of:
- wages or salaries
- pensions
- benefits
- child support payments
- any payments from household members or lodgers
What should be counted as outgoings
Outgoings are any regular payments made on a weekly or monthly basis. These could be:
- mortgage
- rent
- fuel (gas and electric)
- housekeeping (groceries, toiletries)
- school meals
- pocket money for children
- clothing
- TV Licence
- telephone (mobile and landline)
- cable/satellite TV subscriptions
- travel (bus fares, petrol)
- buildings and contents insurance
- car costs (insurance, tax and MOT, servicing)
- maintenance payments paid out
- childcare costs
- medical/dental expenses
- sundries (birthdays, Christmas)
- Hire Purchase payments
- court fines
- money set aside for unexpected events
It is not always easy to think of everything that you spend, it can be helpful to imagine a typical week and write down everything that you do that involves money. Then you can work out how much you spend in each category.
What's left over
Now you need to add up all the income and then add up all the outgoings. Then take away all the outgoings from the total income. Whatever money you have left after you have accounted for all your regular outgoings is called Disposable Income. This should be shared amongst your creditors to clear your debts.
Managing priorities
The basis of a good budget is to make sure that your income and outgoings are balanced. The money going out should not be greater than the money coming in. Remember that every household is different, with different priorities.
Decisions you make about your finances may not be acceptable to someone else. You need to make your own decisions, but remember there will be consequences if you are spending more than you have coming in.
Page last updated: 2 November 2023
