Having a plan for how you’re going to spend your money can help you to stay in control. You might know this kind of plan as a ‘budget’. A budget helps you see what money you have coming in, and what money is going out. Doing this helps you make small tweaks so you save money and don’t overspend.

Taking a closer look at your money can seem stressful. Especially if it’s not something you’ve done before. There are also added pressures if you have a low income or your outgoings are large. If you feel overwhelmed, you can reach out to your bank for support.

In this lesson, we’ll help you understand more about what a budget looks like and why you should budget. We’ll also help you start creating your own budget and give you some tools that can help you do this online.

Our aim is for you to get started with budgeting online. If you’d like to learn more about borrowing and what support you can get, start with our lesson on ‘Budgeting Essentials’.


  • Know what a budget is
  • Be able to say why a budget is important
  • Begin to create your own budget
  • Have a list of tools to help you budget online

Read time:

11 mins

Chapter 1

Why budget?

Read time:

3 mins

How can a budget help you?

A budget can help you work out how much you usually spend. It also shows where you could save some money, and how much you’ll have at the end of each month.

There’s always going to be months where you have spent more or less than your budget. Having a budget just helps make sure you’re not spending everything in your account each month. So, when those more expensive months come, you have some money saved up to cover the added costs.


What are the benefits of a budget?

Know what you’re spending

Stay in control

Have emergency funds

Save for the future

Buying things you want

Know what you’re spending

A budget lets you see all your incoming and outgoing money in one place. This means you’re more aware of what you’re spending. Little spends can all add up. So, looking at your spending helps you see where you’re spending the most money, and where you can cut back.

Some bank accounts will give you a breakdown of your spending in categories, like eating out, entertainment, travel etc. Use this to check if you’re spending more than you expected on food, entertainment etc.


Stay in control

As you become more aware of what’s going in and out of your account, you’ll have a better idea of where to start cutting back. So you’re more likely to stay in control of your money, keep your accounts in credit, and have more money in your account than what you’ve spent.


Have emergency funds

Whether it’s a broken washing machine or an unexpected bill, it’s reassuring to have some money saved up. You might call this your ‘emergency fund’. It means you can pay for things you need to in an emergency, instead of taking out a loan or getting into debt. This can save you money too, as you won’t pay interest or fees on loans, overdrafts or credit charges.


Save for the future

Beyond saving for an emergency, it’s also nice to save for the future. If you have the funds, budgeting helps you see how much you can set aside for your future. Maybe you are saving for a house, a wedding, a baby or even retirement. Whatever you have set for your future, saving and setting aside money now can help.


Buying things you want

When you think of savings in terms of emergencies and the future, it can sound quite scary. But saving isn’t just about large commitments and avoiding risks. It can also be about buying yourself something nice, like clothes, a new TV, a holiday. Budgeting for these kinds of purchases means making sure you can really afford them, and not going into debt.

Chapter 2

Creating a budget

Read time:

6 mins

What does a budget look like?

A budget can come in many forms. Some people will budget using pen and paper, others will turn to electronic or online tools. No matter which way you do it, your budget always includes your income, your outgoings and the balance between them.

In this next section, we’ll look at how a budget can help you see your spending habits and where you could save. You’ll need to know how much income and outgoings you have. So if you haven’t already, open your bank account or find all the relevant details about your income and your spending.

Add up your income

What money do you have coming in?

List your outgoings

The money you spend each day, week or month

Work out the balance

Take away your outgoings from your income

Look at your spending

Is there anything you can change?

1. Add up your income

Income is any money you have coming in - such as from your job, your pension, or if you get any benefits like Universal Credit.

When adding up your income, you should try to only include the money that comes in regularly. This is so you know you can rely on it to cover your outgoings. It doesn’t need to be monthly, it can be once a year or once every 3 months.

For example, say you’ve got something coming in every 3 months. You can still work out how much of it you should be spending monthly. Do this by dividing the total amount by the number of months you want to spread it across. So if you have £300 coming in every 3 months, you might want to budget for £100 a month.

Once you have the details of all your monthly incomings, you can add them together. This is your total monthly income.

It's usually helpful to budget in monthly amounts.

Irregular earnings

If you’re self-employed or have irregular amounts of income, it’s a good idea to work out your average income. You can then use this to work out how much you have to spend each month. To work out your average earnings, add up your earnings for a period of time and divide them by the number of months worked. We’ve got a step-by-step example here.


How to calculate your average earnings:

  1. You earn £500 in month 1
  2. You earn £400 in month 2
  3. You earn £600 in month 3
  4. This adds up to £1,500 earned over 3 months
  5. Divide the total amount by the number of months, to give the average monthly spend – so that’s £1,500 divided by 3
  6. In this example, your earnings are on average £500 a month


It’s harder to rely on this than a set, regular income. But budgeting can make it easier to save the right amount, so you have enough for the months where you earn less.


2. List your outgoings

Your outgoings are what you spend every day, week or month, for example, to buy food or pay your bills. When budgeting, start by looking at your regular spending.


Here’s some examples of outgoings:

  • Mortgage
  • Rent
  • Bills – Like gas, electric, water, internet, and your phone bill
  • Insurance
  • Subscriptions – Like Netflix, gym memberships etc
  • TV licence
  • Council tax


Irregular payments

There are also things you buy regularly that will change in amount. For example, how much you spend on groceries or petrol for your car each month. For these irregular payments, try to estimate how much you spend on them in the average month.


How to calculate your average spending:

  1. Open your bank account
  2. Look at your spending over the last 3 months
  3. Add up how much you’ve spent
  4. Divide this total amount by three


There may also be payments you spend regularly, but not monthly. Try to use the methods we’ve shown you to work out how much you would spend on these every month. You can then make sure you’re putting money away the right amount and not struggling in the months when these payments do go out.

With a credit or debit card and online banking, you can check your statements online. This helps you keep track of what you’ve spent and where.

3. Work out the balance

Once you have an idea of how much your monthly regular payments are on average, you can begin to work out your budget. To do this, you should take away your average monthly spend from your average monthly income.

For example, say you earn an average of £2,000 a month and you spend an average of £1,500 on regular payments. That leaves you with £500 a month - the ‘balance’. You can use this money to pay for irregular costs or put into your savings.

Even if you put a small amount into your savings every month, it can really add up.

4. Look at your spending

Once you know your budget, this might encourage you to start looking at your spending. Especially if your irregular payments are quite high and leaving you with very little to spend on anything else.

Sometimes, there’s not much you can do to save money when costs are high. But, when you look at what you’re spending, you might be able to find some things you don’t actually need, or can cut back on. Check both regular and irregular payments, when you’re doing this.


Regular payments

If you cut out a regular payment, you could save lots of money each year. Just saving a £10 on monthly payments gives you an extra £120 a year!


Ask yourself:

  • Do I really need this?
  • Can I cut it to save money for the future or buy something else?


Irregular payments

Once you’ve looked at your regular payments, you can move on to looking at how much you spend outside these payments.


Ask yourself:

  • Can I cut out anything?
  • Is there anything I could save money on by using a different provider?
  • Can I reduce my usage on anything?


Take 10 minutes now to look at your regular payments to see if there are any you could save on.

Chapter 3

Tools to help you budget online

Read time:

2 mins


There are online budgeting tools that can help you. These do the calculations and have ideas to help you save money. You’ll have to learn how to use them, but they may help you save money and time in a way pen and paper can't.

You can find these kinds of tools on most bank websites. They’re also on services like Citizens Advice and Money Helper. These are both examples of government-approved, trusted organisations that give advice and guidance on a wide range of issues.


Websites, software and apps

There may also be other electronic tools to help you. For example, spreadsheet tools can help speed up budgeting and make it easier. You’ll need to learn how to use them. Once you do, use them to create sheets that will automatically calculate your budget for you. This makes it easier to update the amounts in your income or outgoings as they change each month. The spreadsheet will then automatically calculate your budget and tell you the new balance.

And check out your device’s app store. There’s usually a ‘money’ category. Here, you’ll find some recommended and commonly used apps that may be able to help you budget.

Be careful to select apps and software that are well reviewed, safe and trusted. Check the reviews on your device’s app store. Ask the people you trust which ones they use and can recommend.


Ask yourself:

  • How much you want to spend? – Some apps will be free, some will cost. Ask yourself if they are worth the added cost
  • Are they safe? – Do you want to share your financial information with them or connect them to your bank account? Look for a well-reviewed and trusted provider
  • What do you want to do? – Do you want to make the calculations easier, get ideas on how to cut down or something else?
  • How do you want to access them? – Some apps and websites work better on certain devices. Others only work on a particular type of device. Think about the device you’ll use for this

When selecting apps or software to help you, make sure you read the reviews to understand if they are safe and trusted by others

Lesson complete!

Well done, you’ve finished this lesson on budgeting online. We’ve covered what a budget is and how to start creating your own. You should know how to start looking for online tools that can help you with your budgeting goals online.

When you’re ready for your next lesson, we suggest you go on to take Using email. It’s the first in our lessons on socialising online. In the lesson, you’ll learn the basics of using email and understand more about how it can help you. You’ll learn how to select an email service, and to start writing and using email to talk to people online.

If you’d like to know more about budgeting, including support you can get, you can access our lessons here. If you do need support, Citizens Advice can help, too.


Up next for you:

Next lesson: Using email
Back to: Get started online


Bank of Scotland Academy is committed to providing information in a way that is accessible and useful for our users. This information, however, is not in any way intended to amount to authority or advice on which reliance should be placed. You should seek professional advice as appropriate and required. Any sites, products or services named in this module are just examples of what's available. Bank of Scotland does not endorse the services they provide. The information in this module was last updated on 8th November 2023.