Budgeting in 2025 – everything you need to know to help you save
Getting a clear picture of your income and spending and help you become far more financially secure this year
The new year brings with it all sorts of opportunity and possibility, time to reflect and a natural moment to attempt improvements in many ways – which, for many people, has to do with money.
It can seem easier said than done to shore up one’s financial situation, but the great news is that it doesn’t have to be difficult, complex or even take a long time to really set yourself up for being in a better place.
Here we’re going to break down absolutely everything you need to work out for your own personal budget for 2025, including how you can be more secure in your money situation for the future.
Choose whatever method of notetaking works best for you. That might be an app, perhaps a spreadsheet, maybe even just writing it down on paper. Additionally, you’ll want access to your bank statements, including where you get money paid into and where you spend it from, if they are different.
Starting point: What’s coming in?
- Salary or other job payments
- Dividends, rental funds and other income streams
- Allowances, government support and other credits
This is the first thing to check – it’s surprising how many people don’t know exactly what they have coming in and when. Everybody is different, so make sure you check your own boxes.
For some, this is a simple salary payment every month, from the same employer, at the same time. But for freelancers this can mean checking multiple money arrivals, while self-employed people may get a salary, dividends or a combination of both from their companies. Add in government support, rental payments, child payments, jobseeker’s allowance and other credit types and there may be more than one income type for you to factor into your total starting point.
For a paid salary, if you don’t already know it’s important you find out exactly how much you are left with after tax, national insurance and any other contributions such as student loan repayments.
Once you have that figure, you’re ready to budget... properly.
The next caluculations may come as a shock (positive or negative), but you need to know what you’re spending. So, using your favourite method – writing down, using a spreadsheet, your money tracking app and so on – go over the past two or three months and track your spending for everything. Ideally as you go, put your spending into different categories – more on those below.
Once you have the total for each month, you can get a broad idea of your spending by taking an average. If your average spend is greater than your total income, you know you need to rein it in somewhere. If it’s below, you’ve got room to properly plan what to do with your money. You should also factor in whether you’ve had any unexpected, sudden or large payments that you don’t foresee happening again any time soon – Christmas expenses, perhaps?
Non-negotiable and fixed bills
- Mortgage or rent
- Energy and other fixed bills
- Debt repayments
Here’s where you really start to get a hold of your money and budget properly. From that earlier spending you’ve tracked, you can sort the expenses you have into different sections: bills which must be paid and are fixed, outgoing amounts which can vary month to month and then your own disposable income – which includes your “spending money”.
Rent, for example, or mortgage payments, are very much non-negotiable bills. Likewise energy bills, utilities or other direct debit bills go into this category, whether they’re monthly – insurance payments perhaps – or quarterly, like water bills, TV licence and so on.
Equally vital are any debt repayments you are making (outside of a mortgage), including credit cards. Know your minimum repayments, but also plan to pay down and clear these at the earliest possible moment.
Get this must-have information clear: they are the hurdles you need to jump before you get anywhere near the money you have to spend freely on yourself.
Of only marginally less importance, but equally fixed, are then contracts you have entered into: mobile phone bills, gym subscriptions and so on. At the end of this, you should have a clear picture of money that comes out of your accounts each month in regular fashion.
Variable bills
- Food and other necessities
- Transport or fuel costs and other expenses
That’s not the end of your outgoings, of course. Variable spending comes next for your budget: that earlier tracking you did should give you a good idea of your spending on food and other necessities, such as a sub-total of everything spent at supermarkets.
Any other spending should also be tallied here, like transport costs such as fuel or train passes, and anything else which is a regular or necessary part of your monthly life.
This makes it easier to see where you can lower your expenditure if necessary: do you do too many food shops and never quite get around to using it all? Are your subscriptions mounting up more than you imagined? Maybe there’s even one in there you’d entirely forgotten about, paying it month to month without getting any benefit at all.
Savings and disposable income
- Emergency funds, savings, investing
- Repayments and spending money
From your income total, removing fixed bills and variable bills, what’s left over is essentially your disposable income: money you earn beyond what you have to see go out each month.
When budgeting though – and always depending on your personal circumstances – that shouldn’t simply mean “spend what’s left”.
First up, if you do have credit card or other debt, you want to get rid of it. It costs a lot more in the long term, so contribute funds towards eliminating that debt.
Saving is the next obvious avenue to explore, and beyond that, investing: the points when you can go from managing your money, to actively making it work for you. It’s really important to get an emergency savings fund in place. Most financial experts recommend a minimum of three months’ worth of expenses for it. It won’t happen overnight, but it’s a great thing to watch it grow and know you’re taking care of future you – and those that depend on you.
If you haven’t saved up significantly before, it might sound daunting or boring but we promise it needn’t be, and we’ll have plenty of articles coming to show you exactly how, including a new weekly money newsletter you may find useful.
But to start out, the easiest method to start saving is to use a twin approach: a fixed amount (however small to start) going into a savings account every month (by direct debit after you’ve been paid if you find that easiest to set-and-forget) and also by using round-up pots, which most card issuers now offer.
Simply put, that means if you spend £3.78 on your card somewhere, it’ll automatically round up your spend to £4 and the £0.22 will go into a separate savings pot – don’t touch it and you’ll be surprised how much it mounts up over the months. Meanwhile, a direct debit into a savings account will mean saving money is treated as a “bill” and is a must-have, which is a powerful psychological tool in wealth-building.
You should, of course, also allow yourself a reasonable amount of spending money to go on whatever it is you enjoy doing. A proper, well-managed budget will always have room for this. Things like streaming or media subscriptions might be what you currently spend this on, along with eating out, personal shopping and so on.
But be prepared to make concessions where you need to if your initial workings showed you an overspend or, if you’ve got room for it, start (or increase your amount of) monthly savings into a separate and specific higher interest savings account.
Whichever way you choose to do it, the positive psychology of watching your money grow is undeniable – especially once you’ve got confidence and assurance from the knowledge that you’ve budgeted brilliantly for your months and year ahead.
When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.