Step 1 – what’s coming in?
The first step is to make a list of everything that’s coming in to your bank account. This includes:
• your salary and bonuses
• any benefits
• interest on your account
• regular payments from other people

Make a note of your total income, and put it to one side – you’ll need this figure once you’ve worked out your expenses.

If you can’t remember all the sources of your income, there are plenty of online budget calculators which will help you list all your sources of income.

Step 2 – what do I need to spend?
When you’re working out your expenses, the first place to start is with the essentials. These are the things you absolutely have to spend on, so may include:
• rent or mortgage
• gas and electricity bills
• phone bills
• food
• insurance

Step 3 – what’s left over?
With both figures from step 1 and 2, subtract your essential spending from your income.

Some current accounts have tools, like Lloyds TSB’s Money Manager that can break down your spending into categories such as entertainment, groceries and travel and uses easy-to-read graphs to give you a picture of where your money goes.

The result will be your disposable income – this is what’s left over when all the essentials are covered off.

You’ll now need to divide this up between your different priorities. So things like savings goals, non-essential spending like going out with friends or paying off existing debts.

Prioritising your spending
To get your budget sorted, it’s a good idea to prioritise your spending from your disposable income.

If you’ve got debts to pay off, it often makes sense to do this first. Depending on the interest on these they can be expensive, so it’s best to get them settled as soon as possible.

You may also be hoping to save towards something special. If you have a figure in mind, you can allocate some of your money each month to help you get there.

It’s also a good idea to factor in some money for unexpected expenses – like emergency repairs to your car or home for example.

And finally with your debts covered and your savings goals in the equation, you can start to work out what to do with the rest of your money.

Try to list all the things you might spend it on – so things like nights out with friends or trips to the cinema or to the football at a weekend.

You’ll already have a figure for how much you can afford to spend, so try to allocate some of it to each of these activities each month.

Stick to your budget
With your spending mapped out, the final – and maybe most obvious – step is to stick to your budget.

If you use online banking make sure to log in regularly to check your spending to make sure you’re on track.

And make sure you keep a note of what you’re spending on each activity – it will help you work out how you’re doing and make any adjustments further down the line.

After 6 months, it might be worth reviewing your budget to make sure you’re on track. And if you’re not, you can adjust your budget accordingly to help you do it.