KIS Bridging Loans
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The start of a new year, for many people, feels like a fresh start and a good opportunity for change. Whilst this may be to take up a new hobby or to make a change to your lifestyle, it’s also the perfect time to review your finances and set some financial goals for the year ahead. This is especially relevant for this new year if you want to get your finances back on track after the pandemic.

This guide will give you a step by step process on how to create a budget and get your finances organised for the new year.

First, what are the benefits of using a budget?

The term ‘budget’ can sometimes have quite negative connotations and can imply nothing more than strict cut backs and boundaries – but this isn’t the case. A budget can be a really useful tool for all kinds of money management including saving money, cutting back expenditure, and debt repayment.

Following a budget is also one of the best ways to regain control over your finances and put you on the right path to reach your financial goals.

Evaluate your current situation

Before you can set your goals or start to create a budget, you need to review your current financial position so you know where you’re starting from.  

If you’ve got more than one current account then gather up your most recent bank statements (or open up your banking apps) so you can see your current balances. Also take a look at what you’ve got in savings and investments and add everything up so you know what you’ve got in total.

You also need to look at any outstanding debt that you have. This could be credit card balances or personal loans – don’t include long-term debt like mortgages or vehicle finance that you’re not intending to pay off anytime soon and which fall into your monthly outgoings.

Once you have everything in front of you, you can start to set your goals.

Set your financial goals

You may not have any particular financial goals and just want a budget to manage your day-to-day finances, but if you do have some things that you’d like to achieve then you should set these out before you start to create a budget.

Financial goals could be:

  • Saving up for a big expense like a house deposit, car, wedding or to go travelling
  • Paying off your debts
  • Starting a new business

Whatever your goals are, they need to be realistic. There’s no point in saying that you want to clear all of your debt or buy a house within one year if this just isn’t feasible as it will just set you up for disappointment. This will diminish your motivation and make it even harder to stick to your budget. 

Set yourself realistic goals within realistic time frames, and remember that a budget can be used to accommodate long-term goals as long as you adjust it to your current circumstances along the way.

Step by step process to creating your budget

First you need to decide on where you want to create your budget. This could be pen and paper, an excel spreadsheet, or it could be one of the many available budgeting apps and websites that’s available, so just find something that works for you.

What you should include in your budget


The first thing to add to your budget is your income. This includes your main salary, or income if you’re self-employed, and any other income that you receive on a regular basis.

Committed monthly expenditure

Next you need to add all of your committed monthly expenditure.

This should include:

  • Mortgage/rent payments
  • Bills – council tax, gas and electricity, water etc.
  • Other monthly payments – vehicle finance, insurance products, broadband, phone contract, tv license etc.
  • Debt repayments – credit card payments, loan payments etc.
Other monthly outgoings

You also need to include any other regular monthly outgoings.

This could consist of:

  • Groceries
  • Subscriptions and memberships – e.g. Netflix, gym membership
  • Regular contributions to savings or investments
  • Any other monthly expenses
Contributions to financial goals

Once you’ve added in all of your income and outgoings you’ll be able to see how much you’ve got left over every month. Hopefully your income should exceed your outgoings, but if it doesn’t then you can use your budget to work out where to cut back.

The money you have left over will be the amount you have available for additional spending and to put towards the financial goal(s) you set.

Fun money

Unless you’re creating a budget to really try and cut back your spending, it can be a good idea to incorporate some ‘fun money’ to your monthly outgoings. This would cover things like day trips, evenings out with friends or you could use it to cover birthday gifts for anyone who has a birthday that month etc.

Including this kind of spending money will make it easier to stick to the rest of your budget as you won’t have to pull money from other areas to accommodate additional spending. Also, if you decide not to spend this money one month then you can add it to your savings or put it towards your financial goal(s). 

Once you’ve created your budget, stick to it

The most important thing to do once you’ve created your budget is to stick to it. There’s no point in creating it if you forget about it and don’t use it. So make sure that your budget is easily accessible on a day-to-day basis so you can stay on track. It may also be worth looking into opening an account with a bank like Monzo or Starling who let you easily divide your money into different pots so it’s easier to manage.

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