Budgeting and saving

The information in this guide was last updated on 26/02/2014

Once you know how much money you’re going to have coming in, you can work out a budget to plan exactly where it will go. This will help you manage your money more effectively and plan for the future.

You can begin to budget by:

  • keeping a diary of what you spend for a month, so you can see where your money goes
  • drawing up a budget sheet by writing down what money you have coming in every month and your regular expenses
  • prioritising your spending if your costs are more than the money you have coming in.

To find out more about how to start budgeting, see Managing your money.

Saving for the future

If your money covers your outgoings, you can start putting something aside for your short and long-term goals. Short-term goals could include things like saving for a car or a holiday, while long-term goals might cover things like saving for retirement. However before you start saving you may wish to consider paying down or paying off any debt you have. This is because the interest you pay for borrowing money is likely to be more than the interest you earn on savings.

Savings options you might want to consider include...

Savings accounts

There’s a wide range of savings accounts on the market, from those that give you instant access to your money, to those where you can lock away your money for a fixed period in return for a better rate of interest. The best type of account for you will depend on your own spending needs and savings goals.

Individual Savings Accounts (ISAs)

Before you open any other sort of savings account, it's a good idea to make the most of this tax efficient option. For instance, with a cash ISA, any interest you earn on your savings is protected from tax.

For more information see: ISAs explained.

Workplace pension schemes

Your employer may offer a workplace pension scheme to help employees save for retirement. If you join, a percentage of your pay will be put into the scheme automatically.

Some of workplace schemes operate on a salary sacrifice basis where you receive a lower salary in return for your pension contributions. This can be advantageous to employers as they pay less in National Insurance contributions, but it may not be right for you, so make sure you understand the implications before you agree to it.

All employees aged over 22 and under the state pension age, and who are earning more than £9,440 a year will be automatically enrolled into workplace pension schemes by 2018.