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How to draw up an effective budget

  • Sharon McDougall -
  • 20th October 2021 -
  • 5 minutes to read

For the thousands of Scots who struggle to get to the end of the month without relying on some form of credit, an effective budget could be a massive help. A comprehensive and truthful budget will allow you to see exactly where your money is going and will highlight any problem areas, allowing you to start taking steps to remedy the situation before your debt problems get out of hand.

However, drawing up an effective budget can be harder than you think. A budget that really works involves much more than just writing down what you spent last month, deciding to spend less on going out and takeaways, and then magically finding yourself financially stable.

So how do you draw up an effective budget?

Step 1: Be honest, organised and take your time

The first thing to do is to set aside at least a couple of hours which you can dedicate to drawing up your budget. Ensure that you’ll be able to properly concentrate and then gather all of your receipts, payslips, bank statements and any other relevant paperwork. In order for a budget to be accurate you should aim to look at your incomings and outgoings for at least the last three months.

Step 2: Use a detailed budget planner

You can create your own budget on a spreadsheet (or even on paper), but we often find that using a template budget will help to ensure that you haven't missed anything. The free budget planner tool available on is a great place to start. As well as your obvious bills such as rent/mortgage, council tax, and gas and electricity, don’t forget to include smaller items such as the coffee you buy on your way into work, or your daily lunchtime meal deal. It all adds up!

Step 3: Record all of your spending

Now you have to go through and populate your budget. Make sure that you are brutally honest with yourself here; otherwise you will just be wasting your time. Break your spending down into categories, such as running your home, motoring, food etc. and then highlight all of the figures that constitute essential spending.

Another good idea is to add additional columns to your budget for previous months, or even create an annual figure for each category. This will help you to see if the amount you spend on certain items is relatively stable or if it tends to fluctuate. If your spend on a certain category changes throughout the year, then you may be better to put an average amount into your budget. It is also important to include projections for the costs of one-off or annual events such as Christmas, birthdays, and a summer holiday.

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Step 4: See if your budget balances

Now comes the important bit - does your budget balance? In other words, does the amount you spend in a month total more or less than the amount you earn during this same period?

If you spend less than you earn that’s great; why not think about building up your savings, paying more off your mortgage, or increasing your contributions to your pension scheme? However, if you are spending more than you earn this is a sign that you need to make some changes now, before your debt problems get worse.

Step 5: Figure out how to save some money

Even if your budget is looking healthy it's always a good idea to try and make savings where you can, and if your budget is highlighting some problems this step is absolutely essential. First of all try and save on your essential spending:

  • See if you can lower your mortgage interest rate by switching to another product or provider
  • Shop around for cheaper energy, insurance, and mobile phone deals – you can make serious saving for very little effort here
  • Can you swap your car for something cheaper?
  • Is it possible to walk to work or commute by public transport instead of driving?
  • Huge savings can be made on your grocery bill by switching to cheaper supermarket own brands rather than going straight for the brand names you are familiar with

Next it is time to tackle your non-essential spending, as it is here that you can easily make some big savings by making small changes. Why not consider:

  • Cancelling your gym membership – hit the pavements and go jogging for free
  • Swap monthly paid subscription TV (such as Sky) for a Freeview box
  • Take a packed lunch to work instead of buying it every day
  • Cut down your spending on socialising; rather than going out every week, try hosting a night in instead. You can take this in turn with your friends every few weeks or so
  • Swapping costly foreign holidays for a staycation or even just a quiet week at home

Step 6: Consider professional help

If after cutting down your spending, your budget is still in the red, it’s time to contact the professionals. Scotland Debt Solutions have been helping Scots take control of their finances and find their way out of debt for over 30 years. Contact our friendly and knowledgeable advisers on 0800 063 9250 today for expert help and guidance. We will take the time to understand you and your situation before explaining your options and recommending the best course of action.

Whether this is an informal debt solution, or an insolvency procedure such as a Debt Arrangement Scheme, Trust Deed or Sequestration, here at Scotland Debt Solutions we will be with you every step of the way.

Sharon McDougall
Sharon McDougall

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Sequestration is the Scottish version of bankruptcy and may be suitable for you if you do not have the money to pay back your debts

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