Managing Money as a Young Person: Budgeting 101

Whether you’re earning your first wage, receiving benefits, or managing pocket money, knowing how to handle money sets you up for life. Budgeting might sound complicated, but it’s really just about understanding what you earn, what you spend, and making sure you don’t run out of money. Here’s a practical guide.

Why Budgeting Matters

A budget helps you:

Know where your money goes
Avoid running out before payday
Save for things you want
Manage unexpected costs
Reduce financial stress
Build good money habits
Plan for your future

Step 1: Know Your Income

Write down everything you receive:

Wages or salary
Student loan or grants
Benefits (Universal Credit, housing benefit, etc.)
Pocket money or allowance
Other income (part-time work, selling items)

Be realistic: If your income varies, use an average month or be conservative. It’s better to underestimate than to overspend.

Step 2: Track Your Spending

For two weeks, write down everything you spend. Don’t change your habits – just observe. Include:

Food and groceries
Transport
Phone and internet
Clothes and shopping
Entertainment
Subscriptions
Hobbies
Gifts

Be honest about everything. The vending machine, the coffee, the impulse buys – they all count.

Step 3: Categorise Your Spending

Group expenses into categories:

Essential (Must Pay)

Rent or housing
Council tax or housing costs
Utilities (electric, gas, water)
Food
Transport to work/study
Phone/internet
Insurance

Important (Should Pay)

Savings (even small amounts)
Subscriptions you genuinely use
Hygiene and healthcare
Clothes (replacements)

Wants (Nice to Have)

Entertainment and going out
Hobbies and interests
Takeaways and eating out
Shopping and clothes
Subscriptions you could drop

Step 4: Add It Up

Calculate your monthly spending in each category. Then compare to your income:

Income - Expenses = What’s Left

If you have money left over: Great! You have room to save or spend on wants.

If you’re breaking even: You’re managing but have no safety net.

If you’re spending more than you earn: You need to make changes.

Step 5: Create Your Budget

Based on what you’ve learned, create a realistic monthly budget:

Simple Budget Example

Income: £1,200/month

Fixed Costs:
Rent: £400
Utilities: £50
Phone: £20
Transport: £40
Subtotal: £510

Food & Groceries: £150
Toiletries & clothes: £30
Savings: £50
Entertainment: £100
Misc/Emergency: £50
Subtotal: £380

Total: £890
Left for flexibility: £310

Money-Saving Tips

Once you see where your money goes, you can find savings:

Food

Buy own-brand products (often same quality)
Plan meals and make a shopping list
Buy in bulk for non-perishables
Cook instead of buying takeaways
Take a packed lunch instead of buying lunch
Check expiry dates and use what you have

Transport

Walk or cycle short distances
Use public transport
Buy travel passes instead of single tickets
Combine journeys where possible

Entertainment

Use free activities (parks, libraries, museums)
Have friends round instead of going out
Use free streaming services you have access to
Limit eating out

Shopping

Avoid impulse buys
Check if you actually need something
Wait 24 hours before buying
Use second-hand for clothes and items
Only buy when you really need it

Subscriptions

List all subscriptions
Cancel ones you don’t use
Share subscriptions where possible (family, friends)
Check for free alternatives

The 50/30/20 Rule

A simple approach some people use:

50% on needs (essentials)
30% on wants (nice to have)
20% on savings and debt repayment

Adjust to suit your situation – if housing is expensive, 60/25/15 might work better.

Building an Emergency Fund

Unexpected costs happen. Build a small emergency fund:

Start with £20-50/month if possible
Build to cover one week of expenses
Keep it separate from spending money
Only use for actual emergencies
Replace it once you use it

Even small amounts add up. £25/month = £300/year.

Using Banking Tools

Use technology to help:

Budgeting apps (Emma, Money Dashboard, etc.) track spending automatically
Banking apps show your balance in real-time
Alerts warn you when approaching limit
Saving pots/accounts separate money from temptation
Automatic transfers move money to savings before you can spend it

Avoiding Debt

Don’t spend money you don’t have
Use cash or debit card, not credit
Avoid payday loans (extremely expensive)
If you borrow, understand the cost
Ask for help before things get out of control

When Budgeting Gets Hard

It takes a few months to find your rhythm
Your situation will change – adjust your budget
One bad month doesn’t mean you’ve failed
It’s normal to overspend occasionally
Refocus and get back on track
Ask for help if you’re struggling

Getting Support

If money is really tight:

Talk to Citizens Advice (free help)
Contact StepChange (debt advice)
Ask your council about benefit entitlements
Look into food banks if needed
Don’t suffer in silence – help is available

Key Takeaway

Budgeting isn’t about deprivation – it’s about making your money work for you. When you know where your money goes, you can make deliberate choices instead of wondering why you’re always broke. Start simple, track for a month, adjust, and refine. Soon budgeting will become automatic, and you’ll have more money left over than you expected.

Learning money management in supported accommodation? SERVANTIS provides budgeting and money management support as part of our life skills development. We help young people build financial confidence and independence.