Understanding your budget

BUDGETING ESSENTIALS

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Introduction 1. What's in a budget? 2. Tools to help

In this lesson, you'll learn what a budget is, why it's useful and how you can make your own.

We'll introduce you to people who, like you, are learning to budget and save, and you'll get to see how they do this. 

KEY LEARNINGS

  • What a budget looks like 
  • Tools to help you create your own budget 

Read time:

3 mins

Chapter 1 - What's in a budget?

Chapter 1

What's in a budget?

Read time:

2 mins

Mary's budget

Mary's using a budget to understand how much she spends, where she could save some money and how much she has left over at the end of each month.

Mary's income changes each month. It comes from a mix of her pension and her late husband's savings bonds (you can learn more about savings bonds in our Introduction to Savings lesson). The bonds don't provide her much income – sometimes it's just £20 a month. 

Let's look at Mary's budget.

Income

Pension £600

 

 

 

 

 

 

Total income £600

Spending

Car £70

Phone £15

Insurance £21

Food £200

Gas £30

Electric £30

Water £33

Total spent £399

Unspent

Total income £600 - Total spent £399 = Total unspent £201

What's a budget made of?

You can see that Mary's budget has three parts to it: Income, Spending and Unspent.

Income

Here, Mary lists any money she has coming in, which includes her pension. Her savings bond income is irregular and often small, so she decides not to include it here. 

If you have an irregular income from work (for example, if you're self-employed or on a mixed or zero-hours contract), you could work out what your average income is or budget for your lowest possible monthly income.

Spending

This includes bills such as gas, electricity, and mortgage payments. When making your budget, don't forget to include regular but non-monthly payments such as holidays or car MOTs. 

If you don't add them, they'll surprise you when they come up. Find out what they cost you each year, then divide them by 12 to give you a monthly amount (or 52 if working on a weekly budget).

Unspent

Mary subtracts her spending total from the amount of money she has coming in. She can now see what money she has left at the end of the month for unexpected purchases or savings. 

She can also take a look at the budget to see where she spends the most, to find out if she can reduce her spending.

Introduction - Understanding your budget
Chapter 2 - Tools to help

Chapter 2

Tools to help

Read time:

1 min

Online budgeting tools

As well as creating a table on paper (like Mary did) there are online budgeting tools available which can help. These do the calculations and can make suggestions on where to save, too. 

You can find online budgeting tools on most bank websites, plus Citizens Advice and Money Helper. These are government-approved, trusted organisations that provide advice and guidance on a wide range of issues.

 

Be kind to your mind

Budgeting and looking at spending can be stressful if you have a low income or a large amount of spending.

While it can be tough to create a budget if this applies to you, listing your spending and understanding how to reduce your spending can help.

It's easy to get overwhelmed about money, so take it one step at a time.

Understanding your budget: completed!

You now know what a budget is, and how making a budget can help you manage your money. You've learnt what tools are available to help you make your own budget and start saving each month.

Chapter 1 - What's in a budget?

Exit lesson and mark as complete

 

Lloyds Bank Academy 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. Lloyds Bank does not endorse the services they provide. The information in this module was last updated on 4th November 2024.

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