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How to budget with personal accounts

Accounts Book

We all have money coming in and going out and it helps to keep track of all your money on paper or a computer.  I prefer a simple accounts book. It doesn’t have to be a a special book. I use a simple hard backed book from Poundland.

Balance sheet

Businesses keep a profit and loss account and a balance sheet, you can do the same for your personal accounts. The profit and loss is simply money coming in and going out. List your money coming in on the left hand page and keep a record of all the money going out on the right hand page. You can keep a running balance, so you always know how much you have in your bank accounts. In the back of the book do monthly balance sheets. A balance sheet has your assets; all your savings, investments and perhaps property on one side and all you liabilities like debts and outstanding bills on the others side. The total at the bottom on each side should be the same, hence it should balance.


On the outgoings side of your profit and loss account should be things like housing, council tax, TV license, fuel bills, supermarket shopping, telephone and so on. You might list these separately as ‘regular bills’ and post the total to you main account. On my accounts this month was my car tax which is only once a year, a software purchase and a bill for my new glasses. Last month, I deducted car insurance, clothes and I paid the line rental on my phone for a year (saving me £60 on the usual cost). Obviously you need to see far more money coming in than going out so that you can save up for the annual bills, save for the future or for a holiday.

Money In

On the opposite page you can list all the money you have coming in. This might be wages, benefits, savings interest and so on. Keeping a clear record of this might give you some idea of what your surplus income is, how much you have left over after all the essentials are paid for.

Surplus Income

You should have some surplus income, left over after all the essentials have been paid for. This is your money for luxuries, like socialising and perhaps alcohol. You should be able to increase the amount by cutting down on expenditure that you thought was essential. Use a little less hot water to cut down on your heating bill, maybe switch the heating off when you go out for long periods. You might decide not to eat out for a while, stop buying lunch and take a sandwich to work, drive slower to save on petrol costs or make you own coffee at the office. We all have different ways of saving money, if you’re on a low income, you need to check everything. Can you cut your food costs by shopping around? Can you drink less alcohol? Can you cook more and save on takeaway food and maybe heating costs too?


Once you have saved a little money, then you can look at getting interest on your savings. That obviously adds to your income and gives you more surplus income. If you keep saving, eventually you could double your standard of living by doubling your surplus income.  I like Zopa because it pays me more than the bank would in interest. Currently it’s just over 4% which isn’t good, but better than a bank.

What do you think? please use the comments box to share your thoughts or ask questions. You can also follow me on Twitter to get updates.


3 responses

  1. Pingback: Remember when the British invaded America? | Mike10613's Blog

  2. A great read, thanks Mike

    19, October 2013 at 12:12 pm

    • Thank Ami,

      I’m glad you liked it.

      19, October 2013 at 10:51 pm

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