Having a plan for how you are going to spend your money can help you to stay in control. This kind of plan is known as a budget. A budget helps you to lay out what money you have coming in and what money you have going out. Doing this can help you to make small tweaks that can help you to save money and not overspend.

Taking a closer look at your money can seem stressful. Especially if it's not something you've done before. There are also added pressures if you have low income or if your outgoings are large. If you feel overwhelmed, reaching out to your bank for support can help. But, for now, looking at your budget and taking small steps can help to gain better control and confidence.

In this lesson, we will help you understand more about what a budget looks like and why you should budget. We'll also help you to start creating your own budget and we'll provide you with some tools that can help you do this online.


  • Know what a budget is.
  • Be able to say why a budget is important.
  • Begin to create your own budget.
  • Have a list of tools to help you budget online.

Read time

11 mins

Chapter 1

Chapter 1


Read time

3 mins

How can a budget help you?

A budget can help you to work out how much you usually spend, where you could save some money and how much is left over at the end of each month.

There's always going to be months where you have spent more or spent less than your budget. Having a budget helps to make sure that you're not just spending everything in your account each month. So, when those more expensive months come, you have some money saved up cover the added costs.

The benefits of a budget

  • Know what you're spending - Because you can see all your incoming and outgoing money in one place, you can get a better awareness of what you're spending. Little spends can all add up. So, looking at your spending can help you to be more aware of where you're spending the most money and where you can cut back. Some bank accounts will now allow you to see your spending broken down into categories. So, you can check if you're spending more than you expected on food or entertainment and so on
  • Stay in control - Budgets help to make you more aware of what you have going in and out of your accounts. This means you are more likely to know what you have to spend and where you can begin to make small steps towards cutting back
  • Emergency funds - Whether it's a broken washing machine, an unexpected charge or life just goes a bit wrong, having some money saved up can help. Having what is sometimes called an 'emergency fund' means you can pay for things you need to in an emergency without having to take out a loan or get yourself into debt. This can save you money in the long term by saving on interest fees on loans, overdrafts or credit charges
  • Save for the future - Beyond saving for an emergency, it's also nice to save for the future. If you have the funds, budgeting can help you to understand how much you can set aside for your future. Maybe you are saving for a house, for a wedding, for a baby, or even retirement. Whatever you have set for your future, saving and setting aside money now can help
  • Check your payments - Paying bills and making payments can be a worry for anyone. It can be easy to forget to move money into your account before a payment goes out, maybe you think your payment has been set up correctly, but it hasn't
  • Buying things you want - When you put savings in the context of emergencies and big future savings, it can sound quite scary. But, saving isn't just about big commitments and avoiding risks. It can also be about buying yourself something nice. It could be some clothes, a new TV, a holiday. No matter what it is that you'd really love to buy, budgeting and saving for it can help you. By budgeting for these kinds of purchases, you can make sure you can really afford them so you can buy without the fear of debt or credit you can't pay off

Chapter 2

Chapter 2


Read time

6 mins

What a budget looks like

A budget can come in many forms. Some people will budget using pen and paper. Others will turn to electronic or online tools to begin laying out their incoming and outgoing money. No matter which way you choose, there's always some key parts of a budget. Your income, your outgoings and the balance between them.

In this next section, we'll take a look at how you can start laying out each of these and using your budget to look at your spending habits and what you could save. You'll need to know how much income and outgoings you have. So, if you haven't already, open your bank account or find all the relevant details about what you're spending and your income.


Add up your income

Income is any money you have coming in to spend. This includes any money from pensions or money from benefits like Universal Credit or just the money you make from any work you do.

You should try and include only the money that comes in regularly. This is so you know you can rely on it to cover your outgoings. It doesn't need to be monthly, it can be, for example, once a year or once every three months.

If, for example, you have something that comes in every three months. You can still work out how much of it you should be spending monthly by dividing it by the number of months you need it to spread across. So - if you have £300 coming in every 3 months, you'd probably want to consider budgeting £100 of this every month.

Once you have the details of all your monthly incomings you can add them together. This is your total monthly income.

Irregular earnings

If you're self-employed or have irregular amounts of income. A good way to work this out is by looking at how much you've earned over the course of a few months. You can then work out the average amount you then have to spend in each month. It's harder to rely on this than a set, regular income. But, budgeting can make it more likely that you'll be able to save the right amount to ensure that you have enough for the months where you earn less.

To work out your average earnings, add up your earnings for a period of time and divide them by the number of months worked.


For example:

  • You earn £500 in month 1
  • You earn £400 in month 2
  • You earn £600 in month 3
  • This adds up to £1500 earned over 3 months
  • If you divide the amount by the number of months, it will give you the average monthly spend. So, £1500 divided by 3
  • In this example, your earnings are an average £500 a month


Look at your usual outgoings

Your outgoings is every single amount you spend. You should start by looking at your regular spending.


This includes things like:

  • Your mortgage
  • Your rent
  • Your bills - Like gas, electric, water, internet, and your phone bill.
  • Your insurance
  • Your TV license
  • Your council tax


Irregular payments

There are also things you will buy regularly, but they will change in amount. For example, the amount you spend on food and groceries each month. The amount you spend on petrol for your car and so on.

For these changing amounts that you buy regularly, you should try and estimate how much you spend on them in the average month. To do this, you could take a look at your bank account or spending over a few months. You can then add up how much you've spent and divide them by the number of months.

There may also be payments you don't spend monthly, but that do still come out regularly. Try to use the methods we've show you above to calculate how much you would spend on these monthly. You can then make sure you are putting money away for them monthly and not struggling more for cash in the months when these payments do go out.

Calculate the balance

Once you have an idea of how much your regular payments, each month, on average, you can begin to work out your budget.

You should take away your average monthly spend from your average monthly income. So, say you early an average of £2000 a month and you spend an average of £1500 on regular payments. That leaves you with an amount of £500 unspent. This is called the balance and it can be used to pay for irregular costs and also to save money.

Say one month, you have very little to buy outside your regular payments. You might even have £300 or £400 to put into your savings.

Then, if next month you need to make a big purchase, you can use this money to cover it. Or, you might be able to save up over the course of a few months to buy something bigger. Even if you managed to save up an average of £100 a month. That's still £1200 saved over a year.


Look at your spending habits

Once you know your budget, this might encourage you to start looking at your spending. Especially if you find that your irregular payments are quite high and leaving you with no spending.

Sometimes, there may be little you can do to save money when costs are unavoidably high. But, when you look at what you're spending, both in regular and irregular payments, you might be able to find some things you don't actually need. There may also be something you need but can cut back on to reduce the cost.

Start with your regular payments. Are there any you don't really need? Are there any you can and are happy to get rid of to save money for the future or something you want more? By removing a regular payment, you can save a lot of money each year, as it adds up each month. So, say you manage to save £10 on monthly payments, this will give you £120 saved by the end of the year.

Once you've looked at your regular payments, you can move on to looking at how much you spend outside these payments. Are there any things you could cut? Are there any things you could save money on by using a different provider or lowering the amount you use?

Chapter 3

Chapter 3


Read time

2 mins


There are online budgeting tools which can help you. These do the calculations and can make suggestions to help you save money. You will have to learn how to use them, but in the long term they may help you save money and time in a way pen and paper can't.

These kinds of tools can be found on most bank websites. They can also be found on services like Citizens Advice and Money Helper. These are both examples of government-approved, trusted organisations that provide advice and guidance on a wide range of issues.


Websites, software and Apps

There may also be other electronic tools that can help you. For example, spreadsheet tools are often used to help speed up budgeting and make it easier. You will need to learn how to use them. Once you do, you can use them to create sheets that will automatically calculate your budget for you. So, you can easily change the amounts in your income or outgoings as they change each month. The spreadsheet will then automatically calculate your budget and tell you the new balance.

You should also take a look at your device's app store. There, you can usually find a money category. In this category, you will find some recommended and commonly used apps which may be able to help you to budget.

You should be careful to choose apps and software that are well reviewed, safe and trusted. You should be able to see which are through the reviews on your device's app store. Sometimes, the best way to find out what tools are good are to ask the people you trust for recommendations based on which tools they use too.


You should consider:

  • How much you want to spend? - Some apps will be free, some will cost. So you should consider if they are worth the added cost
  • Are they safe? - Do you want to share your financial information with them or connect them to your bank account? If you do, are they a well-reviewed and trusted provider?
  • What do you want to do? - Think about what features you are looking for in a budgeting tool. Do you want to make the calculations easier, get suggestions on how to cut down or is there another goal in mind?
  • How do you want to access them? - Some apps, software and websites will work better on some devices than others. Others will only work on a particular type of device. So, you should keep in mind what kind of device you would like to use them on

Module complete!

Well done! You have finished this lesson on budgeting online. You should now know what a budget is and be able to begin creating your own. You should also know how to begin looking for online tools which can help you with your budgeting goals online.

When you're ready for your next lesson, we suggest you go on to take 'Using email'. It is the first in our lessons on socialising online. In the lesson, you will learn the basics of using email and understand more about how it can help you. You'll learn how to begin choosing a provider and you'll be able to begin writing and using email to talk to people online.


Up next for you:

Next module: Using email

Back to: Managing money online

Scottish Widows Be Money Well is committed to providing information in a way that is accessible and useful for our users. This information, however, is not in any way intended to amount to authority or advice on which reliance should be placed. You should seek professional advice as appropriate and required. Any sites, products or services named in this module are just examples of what's available. Scottish Widows does not endorse the services they provide. The information in this module was last updated on 31st Oct 2022.