Big budget month day one: how to plan a budget

Money and fuelAs March is the month when George Osborne will deliver his Budget for Britain, we thought it was a good opportunity for us to talk about budgeting as well. If you've never set a budget before, there's never been a better time to start and really get a hold of your finances.
So every day throughout the month we'll guide you through the budgeting process, from planning a budget to cutting your spending to starting saving. Whether your goal is to have some money at the end of the month, save for the future, put some money aside for a special occasion or just get on top of your debts, these articles will help you get there.

Right, let's get started.

Gather together all your paperwork

If you've been sensible, all of your paperwork will be neatly filed away in alphabetical/chronological order. Alternatively, it may be scattered throughout your home.

Unfortunately, the first step of budgeting is to get all of this together - that includes all of your bank statements, credit card statements, pay cheques, utility bills, etc. It's hardly the most exciting of tasks, but you'll feel a great sense of relief once it's done!

Make a list of your earnings and outgoings

This is where all those documents come in handy!

If you don't have online accounts, you could use a pen and paper or a spreadsheet program such as Microsoft Excel.

Just remember that it's really important to be honest when you're doing this - don't leave anything out. Don't forget to include items such as birthday cards, presents, holidays, and your everyday coffee. It's also worth adding in an estimated cost for emergency repairs to your car or boiler. It's always better to overestimate than underestimate, so be generous. And don't forget about any annual insurance policies, such as home insurance.

Similarly, make sure you don't forget anything when you're calculating your earnings too - this can include interest on your savings, benefits, and so on.

It's a good idea to calculate this as an annual figure rather than monthly, because monthly figures can vary considerably - for example, you might be paying out for a holiday one month, or Christmas presents the next. Once you've worked this out, you can divide the result by 12 or 52 to figure out your weekly or monthly expenditure.

Once you've got a detailed picture of where your money is going, you're ready to start looking at your spending habits in detail. We'll look at how to do that tomorrow.

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Big budget month day one: how to plan a budget

This takes time, but once you know the cost of a phone call, putting the dryer on, or a bag of potatoes, it enables you to judge far better how much you can afford to consume.

Once you know the base price, you are in a position to keep your eyes open for a better offer. If you see a discount you can judge for yourself whether it actually constitutes a bargain. For bigger things like utilities it enables you to do a proper price comparison and see if you can cut your bills.

Don't just assume that the premium range is better, try the every-day brand, or even the basic version and see if you spot the difference. Likewise, consider trading down your supermarket from one of the big players to local markets or discounters like Aldi.

If you plan what you buy to match what you actually cook and eat then not only will you be able to budget far more effectively, but you'll also waste much less and find your money goes further without you having to try.

If you can't think of a way to get your meat for less, consider a vegetarian day once a week. If you can't find petrol any cheaper, then work on making your driving as efficient as possible. The more you can think of clever alternatives the less you will have to make painful cuts to make ends meet.

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