If you find that you need to take out a loan because by the end of the month you have no more of your salary left, or you want to work out how you will pay your loan back setting up a budget is an essential tool that you will need to sort out your income.

But before you set up a budget here are some tools and tips:

  • Don’t use approximate amounts, in order for budgets to work the numbers you put in must be as exact as possible. In a nut shell be honest with yourself.
  • Define all the expense categories you have and use, just one omission can throw your whole budget out of balance.
  • Include all expenses in your budget. Not all expenses occur monthly. Certain subscriptions, insurances, taxes and once a year expenses should be broken down into 12 monthly amounts so that they are included in your budget.
  • Keep track of your cash purchases. It’s easier to spend pounds in your pockets on impulse that aren’t in your budget. Lots of small expenses can add up to one big expense at the end of the month. So to maintain control only ever carry the amount you budgeted for personal expenses. So as a tip, save all your receipts even for the smallest purchase and include it in your budget spreadsheet.

So now we are ready to draw up a budget:


The very first step is knowing what goes in and what goes out, whether you are self-employed, work for a boss or a pensioner.

Make a detailed list of your income: pay, tips, bonuses, investment income, gifts the whole lot.

Then you need to make a list of your expenses. This is where you have to be honest, we all know what we spend on rent and have a rough idea of our groceries for the week, but then there is everything else and this is where it often goes wrong. To help with this use the following two strategies:

  1. Go back twelve months. Get hold of everything you can from the last twelve months, print out account, credit card and bank statements. This will give you a picture of the payments you made. Then also gather up any bills you kept, and use them to record your recent purchases.
  2. Write down everything you spend in the next few months. As tedious as it may seem you must write down every penny you spend, but the idea is to create a habit which will become part of your weekly and monthly routine. Keep the receipt for anything you buy even if it’s just a pack of crisps. At the end of the day you put the receipts in an envelope dedicated for that purpose. Then every day or week you write down the data.

At the end of the month review your account and credit card statements to pick up any expenses you missed.


Everyone has fixed (rent, car loans) and variable expenses (mobile phone bills, gas)

For any budget to really make sense its best to break it into types of expenses. They are the following:

Weekly expenses: groceries, fuel, outings, transport etc.

Monthly expenses: Rent or mortgage, electricity and gas, car payments etc.

Annual expenses: Registrations, car maintenance, vacations etc.

Savings and investments: This money is used for special projects in the medium term for such items as renovations and retirement savings. It’s also used to repay loans


Once you have a clear idea of your income and expenses, insert the monthly data in a computerized budget table. Or write it down. This will give you a picture of your monthly situation.

The next step is to take stock of the situation.

If your budget is balanced or you are saving money:

Well done. Use this opportunity to analyse the distribution of your expenses, maybe you can save somewhere that you didn’t notice before.

If your budget has a deficit:

Don’t be discouraged. At least you now have a clear idea of your situation, which is the most important step to taking financial control. Now is when you need to look at solutions. Cut back on some expenses. The most important thing though is to go slowly and be realistic.