- Step one
- List all your income
- Step two
- List essential spending first
- Priority debts
- Housing, council tax, energy and similar
- If it does not balance
- Get free debt advice
On this page
Start with your income
Add up everything you receive each month after tax: wages, benefits, pensions, maintenance and any regular side income. If your income varies, use a low but realistic average. Include only money you can rely on.
List your spending
Gather bank statements for the last two or three months, then group spending into categories.
| Group | Examples |
|---|---|
| Housing | Rent or mortgage, council tax, home insurance, repairs |
| Bills | Energy, water, phone and broadband, TV licence |
| Essentials | Food, toiletries, travel to work, childcare, prescriptions |
| Debts | Credit cards, loans, BNPL, catalogue, overdraft |
| Extras | Eating out, subscriptions, hobbies, gifts, holidays |
| Irregular | Car tax, MOT, Christmas, birthdays, annual insurance |
Do not forget small cash spending and annual bills, which are often missed. Divide yearly costs by 12.
Talk to a free adviser first
An adviser can look at your whole budget, deal with creditors for you and explain which option suits you. Get free debt advice.
See whether it balances
Subtract total spending from income. If there is money left, decide how to use it: a small buffer first, then extra debt payments or savings. If you are short, look at the options below.
Pay priority debts first
Some debts have serious consequences if you miss payments. Deal with these first:
- Rent or mortgage, and secured loans.
- Council tax, energy and water.
- Court fines, child maintenance and tax owed to HMRC. See HMRC debt help.
Credit cards, loans, BNPL and overdrafts are usually non-priority. Pay them from what is left, and do not skip essentials to pay them.
Ways to reduce costs
- Check you are on the right energy deal and ask about social tariffs for water, broadband and phone.
- Cancel subscriptions and memberships you do not use.
- Check you are claiming every benefit and reduction. See debt and benefits.
- Shop around for insurance and switch providers at renewal.
- Plan food shopping and cook in bulk.
Making it stick
- Use a simple spreadsheet, a notebook or an app, whichever you will really use.
- Review it every month and adjust.
- Set aside a small amount for the unexpected, even a few pounds a week.
- Pay bills by direct debit shortly after payday.
If your budget does not balance
If your essential spending is more than your income, borrowing will not fix it. Get free advice to look at income, spending and debts together. Debt charities use a standard financial statement to share your budget with creditors, so you can use the same figures. See our guide to getting debt free, and speak to StepChange, National Debtline, Citizens Advice or MoneyHelper.
Frequently asked questions
How much should I spend on each category?
There is no universal rule. Housing, bills and essentials come first, and what is left is for debts, savings and extras. Percentage rules can be a rough guide only.
Should I include debts in my budget?
Yes, but pay priority debts before credit cards and loans, and never at the cost of essentials.
What if my income changes each month?
Budget on your lowest typical month, and put any extra into a buffer or towards debts.
Are budgeting apps safe?
Choose a reputable app and check how it uses your data. Many people find a simple spreadsheet works just as well.
What if I am still short after cutting costs?
Increase income where you can and speak to a free debt adviser quickly. Options include payment plans and formal debt solutions.
This guide gives general information and is not personal advice. Rules and limits change, so check with a free adviser before acting. Last reviewed 11 November 2026.