With the cost of living continuing to rise, it can sometimes feel like it’s impossible to get on top of your family’s finances. However, creating a budget can be an easy way to understand your money and work out where you can make savings.

What is a budget?

A budget is a way of tracking all of your money coming in, and how it’s being spent. By putting it all together in one place, it’s easy to see where your money is going, and anywhere you might be able to cut back.

What is a family budget?

A family budget will include all your spending for your children. You’ll want to think about all of the different ways you spend on your kids – from childcare costs to days out. By including all of your spending as a family, you’ll get a better idea of where your money is going and what you can afford.

How to create a budget

You can put a budget together:

• on paper 
• using a computer or your phone
• using an online tool, such as MoneyHelper's Budget planner 

Your bank or building society might also have an online budgeting tool that takes information directly from your transactions. Once you’ve decided where you want to create your budget, next you’ll need to look at your income and spending. 

Work out your total monthly income

The first step is to think about all the money you have coming in regularly. This should include:

• your salary
• any Universal Credit, Child Benefit or other benefits you receive
• any extra money you make from a side hustle or second job
• any rental income you get
• any child maintenance or other financial support you get.

If any of these amounts change month to month, it’s best to try and work out a rough average and use that as your figure. Add up all the amounts – you’ll now have a total monthly income.

List your expenses

The next part takes a bit longer – you’ll need to think about all your regular spending and add this together. Again, it’s OK if these amounts change from month to month – a rough average will still help you understand where your money is going. 

Top tip

Split your spending into ‘essentials’ and ‘non-essentials’. This will make it easier to see the spending you’re committed to, and what you might be able to cut back on.

First, think about what you spend on all of the following.

• Household bills – including your rent or mortgage, energy bills and Council Tax 
• Living costs – including your groceries, clothes and pet costs 
• Financial costs – such as insurance, overdraft or credit repayments 
• Costs for your children – including childcare costs, baby essentials, clubs and activities 
• Travel costs – including your car and public transport costs 
• Leisure and entertainment costs – such as meals out, streaming subscriptions and holidays. 

Other costs

The above should cover most of your spend, but have a think about anywhere else your money might be going. It’s a good idea to look through a few bank statements and check if you’ve covered all your regular spending, or if there’s anything that doesn’t fall into the above categories.

Essential and non-essential spending

You might want to think about splitting your spending costs into essential and non-essential. Your essential costs are things that you have no option but to pay, such as your rent or mortgage, energy bills and food.

Non-essentials will be the things you could cut back on if you wanted to. Things like holidays, leisure and entertainment costs usually fall into this category. You’ll then be able to see what amount of your spending is optional, and could be cut back if you’re looking to reach a savings goal. 

Working out what’s left over

The final step is to take your income, and subtract your total spend. What’s left over is how much spare cash you should have at the end of each month. If you’re spending more than the money coming in and end up with a minus amount, there are ways to try and cut your household bills and debts.

Address any household debt

If you’re having trouble paying bills because of debt, you’re not alone. It’s a good idea to:

• speak to a free debt adviser – you can find one on our Debt advice locator tool
• prioritise your bills, as falling behind on some bills can have more serious consequences than others – use our Bill prioritiser to work out which bills to pay first 

Tips to save as a household

Check if you can save on household bills

It’s often possible to cut down your household bills by doing a bit of research. Try comparing deals on:

• energy
• home phone and broadband 
• mobile phone
• home insurance.

Even if it’s saving as little as £5 a month with a cheaper deal, this can make a big difference to your yearly budget. Our guide How to save money on household bills goes into more details on how to compare and switch.

You might also be able to save money by: 

• switching to a water meter, depending on how much water your family uses
• checking if your home is in the right Council Tax band

Look at opening a savings account

If you’re able to put money aside each month, it’s a good idea to store it in a savings account so that you’re earning a bit of interest. Even if it’s just a small amount of money, it helps to know that you’re earning a little bit extra. 

Putting enough aside for an emergency

Having some emergency savings is a great way to prepare for unexpected expenses, especially when things go wrong such as a broken washing machine or boiler.

Make sure you’re claiming any benefits you’re entitled to

Many people don’t realise they could be claiming extra benefits and support. Even if you don’t think it applies to you, it doesn’t hurt to check.

Get help with childcare costs

Depending on your circumstances and the age of your children, you might be able to get:

• Tax-Free Childcare
• up to 30 hours of free childcare.

There are details about both schemes on our guide Help with childcare costs.

Use banking apps to save and track your spending

Some banks will have apps that allow you to view a quick breakdown of your spending. This can be useful if you’re limiting what you spend on certain parts of your overall budget. There are also some apps with features that can automatically put some money aside into a savings account. 

Loud budgeting

It’s not always easy to tell your friends that you can’t afford something, but ‘loud budgeting’ is a trend where people are being more open about their money situation. It can help to reduce the pressure of spending money you’d rather save.

It might mean being open about how much you can spend on gifts and birthday parties, suggesting budget-friendly alternatives to group activities, or sharing money-saving tips with friends.

Regularly review your budget

Once you’ve put together a budget, it’s a good idea to come back to it every so often and adjust it if you need to. You might want to revisit it if:

• your income changes
• you have to pay for something unexpectedly 
• you're trying to save for something, like a holiday.

MoneyHelper's Budget planner allows you to save your results and come back to them later – making it easy to adjust your budget when you need to.

Teaching your kids about money

Putting together a budget can be a good opportunity to start teaching your children about money, and how to be financially responsible. Research shows that the way we behave with money as adults is learned when we’re young through observations of the world around us. So, talking to your children about your budget can be a good way to show them what being careful with money looks like.