You will need information on what you spend your money on at the moment. For some items you can make sensible guesses. For other items you can pick out the actual cost from your bank statements and credit card statements.

One way to do this is to base your budget on what you have spent over the last three months. This is because using your last 12 months' records will take a long time. However, it is sensible to have available your last 12 months’ bank and credit card statements so that you can pick out any items that are paid annually (like the cost of car insurance or a summer holiday).

There are three broad categories that you use your income for each month:

• Needs – These are essential items such as housing, food, gas/electricity and transport. You would find it hard to live without these items.
• Wants – These are items that most people have, but you could do without some of them or choose a cheaper alternative. This includes items such as televisions, mobile phones, designer clothing.
• Savings/debts – Savings can be seen as future needs and wants. Debts can be seen as past needs and wants that we have not yet paid for.

Based on average earnings in the UK, the typical split of spending between needs, wants and savings/debts across the whole of your working lifetime is:

The typical person spends around half of their income on their needs. We probably need to save around 20% of our income throughout our lifetime to have sufficient income to live off in retirement. That leaves around 30% of our income that we can spend on wants.

• How does your spending compare with this pattern?
• Are you spending too much on wants and not enough on savings?
• Are your needs taking up most of your monthly income?

Before answering these questions, it is important to recognise that the split above is an average over your working lifetime. There will be times when you will be able to save more, and times when you will be able to save less. And there may well be times in your life when your spending exceeds your income and you need to borrow.

So don’t beat yourself up now if you are not saving 20% of your income. The important point to understand what you are spending your money on and if you want to change that pattern, have a plan for how you are going to achieve it, and also to be aware that you should take the opportunities that may arise to save a bit more in the future if you are not able to save much now.

Planning a budget can be as simple as writing down the main categories of spending in your household and then estimating how much you spend on each of these categories each year. You can then compare this with your income.

The main categories of spending might be:

• Mortgage/rent
• Household bills
• Food
• Clothing
• Insurances
• Debt repayments
• Car costs
• Mobile phone
• Leisure
• Petrol/transport
• Savings
• Family
• Christmas
• Holidays
• Sofa/kitchen items/TV
• Other small items

If you have access to a computer, you can set up a simple spreadsheet to record these items. Or you can use one of the budget planners on these websites:

https://www.moneysavingexpert.com/banking/Budget-planning/#bplanner

https://www.moneyadviceservice.org.uk/en/tools/budget-planner

Once you have all of the information you need, it should take no more than an hour to establish a reasonable budget.

You will now have planned your budget, and have a good idea of your ideal spending plan.

• Are you spending in line with your ideal spending plan?
• Do you spend too much and save too little?
• Or do you spend too little and save too much?

In short, are you an "over spender", "balanced spender" or a "big saver"?

The first step in making your money go further is to complete a budget of what you spend your money on now. This will help you to understand your current financial position and enable you to compare your current spending pattern with what you would like it to be.

The chart below shows a typical spending pattern split between needs, wants and savings for different ages.

As can be seen from the chart, the typical spending pattern changes considerably throughout a lifetime.

Age	Typical circumstances affecting needs, wants and savings
20 - 22: Early twenties	Living at home with low needs, lots of spending on wants and very little saving.
22 - 26: Mid twenties	First home, lots of needs, still lots of wants and so still no saving or some borrowing.
26 - 30: Late twenties	DINKies Dual income, no kids.
30 - 35: Early thirties	SILKies (Single income, loads of kids).
35 - 47: Late thirties/forties	Children getting older, husband and wife working.
47 - 52: Late forties/early fifties	Spending on children as they go to university or move out.
52 - 65: Late fifties to retirement	DINKies again

	Over spender	Balanced	Big saver
Getting the best deals	Very important to get the best deals for you. Could be enough to put you in a Balanced position.	Important to get the best deals for you.	Important to get the best deals for you. Always feels good to get a better deal.
Balancing wants and savings	Very important to think about spending on wants and whether you can reduce these.	Your spending may be in line with you income, but are you saving enough? Consider whether you have the right balance between wants and savings.	Are you saving too much? Are there things you want to do that you are not doing due to high savings?
Making your money work	Very important to think about making the most of your debts.	Important to make the most of your debts and savings.	Make the most of your savings.

So you would like to reduce the amount you spend on wants so that you can save more?

Have a look through each of the items of expenditure in your budget that go on your "wants". Ask yourself these questions:

• Do you use it?
• Is there a cheaper alternative that is the right quality for you?
• Can you live without it?

If there are items that you spend money on that you can change, make a mental note to either do without or to buy it less frequently or to buy a cheaper alternative.

Add up all the items that you are going to save money on and write down the total. This is going to be your new extra saving amount each month. The next stage is to decide where to save it!

Don’t worry if the amount seems small. You cannot stop spending altogether on your wants as you need to enjoy life now. And saving a small amount now will add up to a large amount in the future.