Steps 1-4: Income and expenses

Step 1. How much money do you have coming in?

Working out how much money comes into your household is the first step towards completing a personal budget. You need this to work out how much money to offer creditors (the people you owe money to).
Write down all of the money you have coming in. Include money received by yourself and your partner (if you have one), such as: 

  • Your take-home pay
  • Overtime or bonuses – but only if this is received regularly
  • Any welfare benefits you receive
  • Child Benefit 
  • Tax Credits
  • Universal Credit
  • Contributions from any grown up children that live with you
  • Child Support or other maintenance payments received
  • Any other income

Do not include Housing Benefit or Council Tax Reduction, this is covered later in Step 3.

When filling in your personal budget decide whether you want to plan your budget on a weekly or monthly basis, but don’t mix the two.

To convert a monthly figure to a weekly figure multiply by 12 then divide by 52.

To convert a weekly figure to a monthly figure multiply by 52 and divide by 12.

Note: Some benefits are paid 4 weekly – to get the correct figure for the budget multiply by 13 then divide by 12 for a monthly figure or 52 for a weekly figure.

Now enter your income figures on to the income section of the personal budget sheet, then, add up the weekly or monthly total.

Step 2. Maximising your income

One of the most important things you can do to help sort out your money problems, is to make sure you are getting all the income you possibly can. There are a number of ways you may be able to do this – here are a few suggestions:

Tax codes

If you or your partner are employed, go to GOV.UK - Check your Income Tax to make sure you have the right tax code.


If you have children, you should be receiving Child Benefit and may be eligible for other benefits. If you are working, you may be entitled to:

  • Universal Credit
  • Council Tax Reduction

If you have a child with a disability they may be entitled to Disability Living Allowance, if you have a disability regardless of whether you are working, you may entitled to a Personal Independence Payment. 

If you are looking for work, or unable to work full time, you may be entitled to a range of benefits, including:

  • New Style Jobseekers Allowance (Contribution Based)
  • New Style Employment and Support Allowance (Contribution Based)
  • Universal Credit

You can find out more about benefit entitlement by clicking on the individual benefits, going to our Benefit Toolkit or checking your benefit entitlement.

The national number for claiming benefits is 0800 055 6688.


If you have grown up children or other relatives living with you, try to ensure they pay a realistic amount towards the household expenses.


If you have a spare room, you may consider taking in a lodger for a weekly charge. However, before doing this, you should check what effect this may have on any benefits you are receiving. You should also check the terms of your tenancy or mortgage.

Lump sums

You may be able to pay some debts by raising a lump sum by selling something, but make sure you don’t sell anything you are still paying for on hire purchase (see step 5 for information about hire purchase agreements).

Maintenance/Child Support

If you have children who have an absent parent, you may be able to get maintenance/child support payments from them. Contact the Child Maintenance Service for advice.

Step 3. Where does the money go?

In this section, you need to work out how much money you and your family spend on living expenses.

At this stage, do not include any instalment or payment arrangements for debts or arrears.

Use the budget sheet, which you should have already started to complete. The headings should help to remind you of some of your household expenses.

As with your income, you must work out payments over the same period, so if you have decided to do a weekly budget, then make sure you convert all payments to weekly figures, if your budget is monthly, then convert all figures to monthly amounts. If you can’t remember how to do this, go back to Step 1.

Here is some guidance to help you when thinking about your outgoings.


If you receive Housing Benefit, your rent figure should be the amount you actually have to pay after your benefit is received. If you receive Universal Credit this will be the actual rent you have to pay.


If you receive help with your mortgage interest your mortgage figure should be the actual amount you have to pay. Include all capital and endowment payments as well as the interest.

Council Tax

If you receive Council Tax Reduction, count only the Council Tax you have to pay after the reduction has been taken into account. At this stage, count only Council Tax for the current year, we will look at Council Tax arrears later in Step 5


Include food, toiletries, cleaning materials. Remember to include trips to the local shop as well as your supermarket shop.
A rough guide to average weekly housekeeping expenditure is:

  • Single person £50 - £70
  • Couple £80 - £130
  • Each child £20 - £30

TV Licence

It is a legal requirement to have a TV licence, you must budget for this, even if you do not currently have a licence. For options on how to pay for your TV licence, including a weekly cash payment plan, contact TV Licensing.

Water rates

There are two ways of being billed for water rates. You will have a meter installed so that you are billed for the actual water that you use or if you are unable to have a meter you can be billed a set amount, based on the rateable value of your property.
If you have arrears of water rates, make an arrangement to cover your current charges, the arrears should then be dealt with as a non-priority creditor see Step 5.

Travelling expenses

Include travelling to work, school and shopping. If you run a car, include road tax, insurance, repairs MOT and servicing, as well as petrol. If you take the bus, include all of the family’s journeys.

School meals/meals at work

Include any money you give to children to pay for school meals and any money you or your partner spend on meals and snacks at work. You may be surprised at how much your weekly or monthly total spend is. It’s always worth considering making pack lunches as a cheaper alternative.  Your children are entitled to free school meals if you receive Income Support, Income based Jobseekers Allowance, Pension Guarantee Credit, Universal Credit (if household income is less than £7,400 a year after tax and not including any benefits) or if your income is below £16,190 and you receive Child Tax Credit, but not Working Tax Credit.

All children in reception, year 1 and 2 will receive free school meals.


As a rough guide to average expenditure on clothing, you should allow around £5- £10 per week, per family member. However, if you are in financial difficulty, you should perhaps consider just allowing an amount for children’s clothing.

Cable/Satellite TV

The cost of a sky or cable package can vary depending on your choice of channels, you can expect to pay anything from £16 per month. You may need permission from your landlord to install a satellite dish, particularly if you live in a flat.
You might want to consider a Freeview box, they have many of the same channels as cable and satellite packages without the monthly fees.

Entertainment and cigarettes

Spending money on things like cigarettes, alcohol, DVDs, holidays, sporting activities etc. pose special problems if you are having financial difficulties. Most creditors (the people you owe money to) are likely to query expenditure on these items. As a general guide, how much you spend on these things should be looked at in light of your other essential outgoings and what you can afford.

It is very likely you will have to consider ways of keeping these expenses low. Initially you need to work you how much you are actually spending. If it is clear that you are spending more that you can realistically afford, think about how to cut back and put a reasonable figure in your budget which you know you can manage to keep to.

Expenditure cushion

You may want to include something for unexpected expenses for example if your fridge or cooker breaks down and things like birthdays, Christmas and other religious festivals, children’s pocket money and school trips.

By putting small amounts aside regularly you will be able to cope with these events without having to miss payments on other things, especially your rent.

It’s a good idea to keep your savings in a separate account from the one you use for day-to-day income and outgoings.

Add up all of your expenses on your budget sheet.

Step 4. How much money is left over?

Now you need to take away your total expenses (the money you spend each week/month) from your total income. Enter this figure in the ‘first money for creditors’ box on the budget sheet. If you do have any money left over you can use it to pay your debts, even if you can only pay a very small amount each week or month. This could be as little as £1 or £2 per month if you are on a low income.

Very little or nothing left?

If there is nothing left, or you spend more than you have coming in, take a look at where your money goes. Could you get a cheaper deal on your telephone, internet, insurances or utilities? Could you smoke fewer cigarettes or change to rolling tobacco? Maybe you could walk instead of taking the bus, or do without your daily newspaper? You may have to consider reducing the amount you have allowed for clothing or your expenditure cushion.

It is likely that you will have to sacrifice something in order to pay your debts, especially if you have priority creditors (i.e. rent, mortgage, Council Tax, gas, electricity or TV licence arrears – see Step 5). Although you may have to look at sacrifices, you must still allow enough for basics, such as food.

Contact us

For further advice, you can contact our Welfare Rights and Money Advice team.