Savings basics: How working out a budget can help you save

Saving more money is one of our top five New Year’s resolutions (tussling with diet and fitness-related promises hold the number one spot)1.

If you’re serious about saving more, it can help to have a budget in mind and even if you think you know what you’re doing, going back to basics can re-ignite your savings enthusiasm.

While working out a budget might sound a bit too simple to bother with, or maybe a little too serious, think again. It is simply a way of determining how you use your money. And if you really want to save, it’s one of the first things you should do.

Your four-point budget plan

  1. Work out what money you have coming in each month. This could include income, pension, interest on savings, rent from a let property and so on.
  2. Add up all your essential monthly financial and household expenses such as your mortgage payments or rent, utilities, insurance, credit cards, savings and travel expenses. Where you have annual bills – for example your car’s road tax – divide this by 12 to get the monthly amount.
  3. Subtract your monthly expenses (2) from your income (1) to give you, hopefully, an amount for all the non-essentials such as clothes, holidays and going out.
  4. Fingers crossed you’re left with a healthy amount, but whether you are or not, it can pay to rebalance your budget. That may sound a bit too sophisticated for your needs, but it’s just a case of taking another look at your list of essentials to see where you can reduce bills. That way, you can boost your spending money or even save a little more each month.

Helpful resources for rebalancing your budget

There are plenty of tools to help. For example the Money Advice Service has two budget planner tools on its website to help you crunch the figures.

Plus you can easily shop around for cheaper deals on your utilities and insurance at websites such as, uSwitch and

Sticking to your budget

Once you’ve worked out what you can – and can’t – spend, it can take some serious willpower to stick to your budget, but we have some tips to help:

Set a goal
No one cuts back on their spending for fun, but setting a financial goal gives you a reason to be frugal. It’s amazing how effective this can be.

Use cash instead of cards
If you only draw out what you can afford to spend each week, you shouldn’t bust your budget.

Think before you buy
Is it really worth overspending for that little luxury? Give yourself a couple of days to mull it over – chances are, it is only an impulse buy.

Reward yourself
Allocate some of your budget for small treats along the way so you don’t feel deprived and will be more inclined to stick to your budget over the longer term.

Budget benefits

Having this sort of plan in place can be incredibly insightful. As well as showing you how much money you need each month, it’ll also highlight any financial weaknesses and areas where you could make savings.

As an example, take your daily cappuccino, tall skinny latte, or straight up americano. Its price tag, on average £3.50, may seem a small amount for the daily pleasure it delivers on your way to work. But, multiply that by 20 to get the average monthly spend, and it comes to a not-quite-so-palatable £70. Over a year, that’s almost £840!

And it’s not just about giving up the treats; even the essentials can be sources of savings. If you can shop around regularly for everything from the best phone deal to the cheapest electricity, it can save you hundreds of pounds a year — and it’s much easier to take this action when you know exactly what you’re spending.

Don’t forget to review your budget

A quick review every six months or when something changes, for example a pay rise or cheaper bills, will make sure you stay on track for a financially rewarding year.

This blog is intended to provide information, not financial advice, to help you make an informed decision about savings and investments. We do not offer financial advice. You should contact a financial adviser, who may charge a fee, if you want financial advice.


  1. YouGov – New Year Resolutions:What New Year Resolutions are people setting in 2023