Why budget?

A new budget can help you track your money in a way that suits you. Whether that's using a budget planner, an app, a budget spreadsheet or pen and paper.

Although it takes some effort, getting it done could mean you find it easier to cover essential costs, cut back or save. Read our 6 steps and start today.

Work out your monthly income

Every budget starts with your net income. This could include one or more of:

  • take-home pay (wage minus taxes and employer deductions like pension contributions and student loan repayments)
  • any benefits or tax credits you receive
  • extra money from other sources (like selling second hand items)
  • dividends from shares

If you're self-employed this can be more complex to calculate. Take an average or range of your incomes each month. It's useful to keep details of your contracts and pay to manage any irregular income.

Check how much you spend

Once you know how much money you have coming in, the next step is to figure out where it’s going.

Some like to go through their paper statements, others prefer spreadsheets and some like to keep it within an app. It's up to you as long as you're able to be as accurate as possible.

Capture all spending, including:

  • rent (or mortgage)
  • bills
  • subscriptions
  • eating out
  • impulse buys

This list can be long but noting everything down will help you to get organised.


Look over the past 3 months to identify patterns and one off spends. This will help you build a more accurate picture of a typical month for you.

Categorise your spending

Once you have your list of what you're spending, categorising can help you understand what you 'must' spend versus what you 'want' to spend.


Your must spends cover essential living expenses – the basic things you need. Here are some common examples:

  1. Big bills

    Rent or mortgage
    Water, gas and electric bills
    Car payments

  2. Smaller bills

    Phone bill
    Council Tax

  3. Essentials

    Basic toiletries

When looking to cut back, you can note what must spends are fixed and what can be flexible.


Your wants cover things you enjoy but may not need, like:

  • your Netflix subscription

  • eating out

  • personal treats

  • hobbies

  • memberships like the gym

Understanding your spending habits can help to identify the treats you don't really need. But budgeting is meant to help improve your financial well-being. If giving up your Spotify subscription or Friday coffee will make you unhappy, maybe keep them. It's about balance and cutting back on things you feel you can give up comfortably.


Looking at your wants can help you cut back on some things you may be okay without. This can free up some money for other things, like essential bills, savings or spending elsewhere.

Help with essential costs

Pre-agreed payments like rent, car payments and some utility bills can be tricky to change instantly. But if you'd like to see what options are out there

Make a budget plan

Now you have a solid idea of your income and spending it's a good time to create a plan that you can track.

Creating a budget plan should be personal to you and help you decide what you want to spend, and where you've decided to cut back. Doing this can keep you enjoying the things you love whilst living within your means.

The 50-30-20 rule is great way to plan out your spending. The idea is you'd aim to spend your income:

  • 50% on musts – your fixed outgoings and essential living expenses
  • 30% on wants – your day-to-day spending and the things you enjoy
  • 20% on savings or debt – paying more than your minimum payments or putting money into savings account, pot, ISA or investment

Here's an example of how this could look if your monthly income, after tax and other deductions is £1,500:

  • £750 on needs
  • £450 on wants
  • £300 on savings or debts

The 50-30-20 rule is just an example. You can split in any way to meet your needs.

Create a budget

You can create your plan through any form of budget planner. If you’re not sure where to start, you can try Money Helper’s Budget Planner.

Keep on track

Once you have a budget plan, sticking to it can be hard. Things happen - those unexpected events or gifts you want to buy all impact your plan. Expect your budget to change a little and prepare to adapt.

By tracking what you're spending, you can easily see what you must spend and where you have some flexibility. Track instantly by checking your upcoming payments through online banking.

If you’re a Nationwide customer, you can use the Internet Bank or Banking app.

Not yet registered for our Internet Bank? Register for online banking today.

You can also explore free apps to manage your spending across all your bank and building society accounts.


It may be worth aligning the timing of your fixed outgoings with your income. If you get paid weekly but your direct debits are monthly you may want to spread them or condense them to suit your needs.

Set goals

Having a goal creates a reason to stay on track or reduce your spending.

Your goals should be personal to you to help you feel motivated to achieve them. Here are some options you may want to explore.


Carving out money to save (no matter how little) and treating it like a bill you have to pay, can help create good savings habits.

You may want to open a savings account or (Individual Savings Account) ISA for events, holidays or a big purchase.

If you're new to saving, you can start small with a short-term goal and create a savings pot or account called a 'sinking fund'. A sinking fund is a way to save money for a specific goal by setting aside a little bit each month. Here are some savings goal ideas:

  1. Longer term savings

    Home deposit
    Emergency fund

  2. Sinking funds


Ways to save

We’ve got a range of tools, accounts and guidance to help make saving hassle-free. Find out more ways to save with Nationwide.

Pay off debt

Paying off more than your minimum amount on a loan or credit card can make sense if you're paying interest on your debts.

The cost of debt is generally more than the interest you earn on savings, so you could find yourself better off when you balance out both. You may want to find out if paying off more of your debts, before saving, would benefit you.

Spend less in one area

Setting a goal to try and reduce your spending in something you think you can cut back on, like eating out, can help you see extra money stay in your account.

Creating small challenges like this can help you to stay active with your budget plan. It encourages you to track your spending, making you focus on the bigger picture too.