Financial enslavement is corrosive and toxic. Left too long, it will not only lead you into serious monetary difficulty but it will erode your personal life, disrupt or destroy relationships and have serious effects on your health

Avoiding this enslavement – where you have to earn more and more just to maintain your commitments and keep on repaying debts relies upon being able to live within your means, putting money aside for a rainy day and your retirement and responsible use of credit.

All three of these are predicated upon setting a household budget and sticking to it. But, despite this being a relatively simple task, it seems to be something that many Britons prefer not to do: recent surveys have indicated that fewer than three in 10 people in the UK keep track of all their income and expenditure!


But having a home budget will help you achieve your life goals as well as ridding yourself of the burden or debt, saving for a house or putting money to one side for a pension. And here is how you do it:

  1. Get all of your financial information together

That means that you are going to need all of your bank statements for the last six months, your credit card statements, utility bills, savings accounts statements and all of your wage slips and other information about income.

  1. Learn to use spreadsheet software

Excel and other spreadsheet applications may look daunting but they are actually remarkably simple. If you can set your budget up in a spreadsheet, it will mean that you’ll be able to regularly update it and let it take care of the addition and subtraction which will show whether you’re on track or not in the months and years ahead. Alternatively use Money Advice Service’s online budget calculator.

  1. Determine your exact income

List all of your income – your salary, self-employment earnings, pension income, savings income and income from any rental property. Don’t leave out income that is not monthly which might include share dividends. Now put all of this in a column on your spreadsheet and calculate totals for the year and then divide by 12 to get your monthly expenditure.

  1. Add up all of your expenditure

It’s a good idea to separate fixed payments – like standing orders, direct debits and so on for repayments and other bills – in one column and variable expenditure like food shopping another. Don’t forget occasional items like car servicing and do not leave out other household costs like Christmas, birthdays and how much you spend on holidays, etc. Add all of these up for your yearly expenditure and then divide by 12 to get the monthly total.

  1. Calculate your surplus or deficit

This is the bit that really matters for your bottom line. Subtract your annual and monthly expenditure from your income. Obviously a negative number for either will indicate that you are spending more than you can afford and need to take remedial action. But don’t be lulled into a false sense of security if both of these totals are positive because having a monthly budget is the key to when it comes to long-term financial security. Once you have got these figures down in black and white, it should become obvious where you can make savings and where you’re spending unnecessarily. If you are regularly facing shortfalls, then having a monthly budget will make some of those luxury payments – perhaps a satellite or film and TV subscription – seem much less like ‘must haves’ and more like frivolous wastes of money.

  1. Set a budget

You may not be able to reduce the amount you are spending on debt repayment or other fixed outgoings. But having your monthly budget in front of you will allow you to set a limit on household shopping or entertainment.  If you have got your budget in a spreadsheet, then you’ll be able to see how making some relatively small changes (like making your lunch during the week rather than buying it at a café) can have a dramatic effect when spread across an entire year. You can also then concentrate on making other savings like switching your utility providers or perhaps changing your current account to another bank.

Once you have made your budget it’s important that you discuss it with the whole family to ensure that everybody is committed to making it work. Equally important is sticking to it by keeping it updated every week. Consider reserving a set time every week to do this.

Go to our blog for more great tips on managing your money.