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If your money seems to disappear as quickly as you get it, you’re not alone. Budgeting isn’t about restricting yourself, it’s about having a clear plan for where your money goes. At its simplest, a budget is a financial game plan. It helps you understand what’s coming in (your income) and what’s going out (your expenditure) so you can make intentional choices rather than reacting in the moment.
Income is any money you receive. For young people, that might include pocket money, birthday gifts, part-time job earnings or payments for chores. For adults, it could include wages, freelance work, benefits or other regular payments. The key is to know your total income over a set period, usually weekly or monthly, so you’re working with real figures, not guesses.
Expenditure is everything you spend money on. This can be split into two broad categories: needs and wants. Needs are essential costs. For young people, that might be school meals or transport. For adults, it could include rent, bills and food. Wants are non-essential purchases: new trainers, takeaways, streaming subscriptions or impulse buys. The distinction matters because when money is tight, needs have to come first.
The Financial Conduct Authority (FCA) highlights budgeting as one of the simplest ways to stay in control of your finances and avoid falling into difficulty. Tracking spending allows you to identify patterns (for example, how small, regular purchases can add up over time (FCA, Financial difficulties guidance)). This awareness is powerful. Research from the Financial Capability Survey shows that people who actively keep track of their money are more likely to feel confident managing it and less likely to experience
financial stress (FCA, Financial Lives Survey).
The core budgeting formula is straightforward:
Income – Expenditure = What’s left over.
If the result is positive, you have money available to save. Savings are funds set aside for future use, whether that’s short-term goals like a new phone, or longer-term goals like university, travel or a first home. The Bank of England notes that building savings can provide a buffer against unexpected costs, such as repairs or sudden loss of income, helping households remain financially resilient during economic uncertainty (Bank of England, Household finances overview).
If the result is zero, you’ve spent exactly what you received. While this means you’re not overspending, you’re also not building a financial cushion.
If the result is negative, you’ve overspent. Consistent overspending can lead to borrowing to cover gaps, which may result in interest charges and long-term financial strain. UK Finance reports that many people who experience financial difficulty cite unplanned expenses combined with a lack of savings as a key trigger (UK Finance, Financial wellbeing research).
Budgeting doesn’t have to be complicated. It can be as simple as writing down what you receive, listing what you spend, and reviewing it regularly. The Office for National Statistics (ONS) consistently shows that households that monitor their expenditure patterns are better able to adapt during periods of rising living costs (ONS, Family spending reports).
Ultimately, budgeting is not about saying “no” to everything you enjoy. It’s about making sure your needs are covered first, understanding your spending habits, and giving yourself the best chance to save for what matters to you. When you know where your money is going, you’re in control, not the other way around.
Financial Conduct Authority – Financial Lives Survey
National research on how UK adults manage money, including findings on budgeting, financial confidence and vulnerability.
https://www.fca.org.uk/publication/research/financial-lives-survey-2022.pdf
Financial Conduct Authority – Guidance for firms on supporting customers in financial difficulty
Explains common drivers of financial stress and the importance of affordability and sustainable money management.
https://www.fca.org.uk/publication/finalised-guidance/fg22-5.pdf
Bank of England – Household resilience and financial stability reports
Commentary and data on household savings, economic shocks, and why financial buffers matter.
https://www.bankofengland.co.uk/financial-stability-report
Office for National Statistics – Family Spending in the UK
Annual data on household income and expenditure patterns, showing how spending habits change over time.
https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure
UK Finance – Financial wellbeing and household finance research
Industry data and analysis on savings levels, borrowing trends and financial pressure.
