Budgeting for beginners

The key to achieving your financial goals is creating a budget and sticking to it. It's easier than you think to set one up and stay in control of your money.

Whether your goal is simply having some money left at the end of the month or something more ambitious, like owning a second home abroad, organising your money is crucial.

Budgeting will highlight whether you're spending more than you earn – so you can take control of debts and break any bad money habits. If you're looking to start a regular saving or investment pot for a specific goal, budgeting will show you how much you can afford to put away.

How to set up a budget

Use our budgeting tool or alternatively, follow these steps:

Step 1

Write down all your income – add up your pay after tax, any pensions, benefits or tax credits you get, plus any other income like interest on savings or rental income.

Step 2

Write down what you spend – you need to include everything, from household bills, mortgage and insurance to travel costs, leisure activities and even what you spend on treats and presents. Don't forget things like payments to your credit cards and things you may pay only once a year, like road tax and your TV licence. Get out your bank statements, as these might help you with some of the regular payments.

Be honest – you'll be surprised how much everything adds up to. Try writing everything down for a week – coffee on the way to work, drinks with friends, magazines… you'll soon start to see where your money goes.

Step 3

Work out a realistic budget – start by making sure you are not spending more than you are bringing in. Look at your spending to see where your money is going, and identify areas a few areas to cut back on, if you need to. Be prepared to change your habits, and a lot of small changes will add up to a much healthier budget.

Step 4

Set out your goals and priorities – think about what you want to achieve with your money. This can vary from not being overdrawn every month, paying off debts and credit cards to saving for a wedding or the holiday of a lifetime. Or, it might just be the fact that you have some savings – so you could cope with unforeseen expenses as an emergency fund.

Step 5

Take action – see how you can adjust your budget to help you move towards your goal. Set up that savings account, pay extra on your credit card to bring down the debt, review your bills and see where you can get a better deal.

Top tips for budgeting

• Keep an accurate note of how much you spend for one full month. That includes incidentals like magazines, lunches, cups of coffee and drinks in the pub. Only then will you be able to work out how much your day-to-day living is costing you.
• Try to pay as many bills as you can by Direct Debit every month. You're likely to get a discount for paying this way and it helps you spread bills more evenly across the year.
• Don't rush into buying something just because you want it today. Go away and check out the price elsewhere, and the best way to pay for your purchase. You should be especially careful with big-ticket items like cars and furniture.

How NatWest can help you

• Why not sign up for Online Banking and text alerts? Having access to your transactions 24/7 can help you keep track of your money and manage your accounts more efficiently. (You can sign up for the service if you have a NatWest current account, savings account, credit card or loan.)
• If you need extra money to cope with extra expenditure at a particular time, then an overdraft might be the answer. Contact us to arrange this. Unauthorised overdraft rates are much higher than authorised ones, and you also run the risk of having bills unpaid or Direct Debits returned. (Overdrafts are only available to current account customers over 18 who meet our lending criteria and come with interest charges and fees.)
• If you think you will need the money for longer than a few months, then a personal loan might be a better option than an overdraft. It is sensible to shop around for a loan to suit your needs – look for a competitive interest rate but also check the terms and conditions. NatWest Personal loans.
• If you're struggling to repay a NatWest overdraft, loan or mortgage, see Dealing with Financial Difficulties