To start your draft budget, you need to list all of your income sources against your expenses, try to calculate per calendar month. It helps to examine a few month's bank statements, but also any cash withdrawals. If you make a lof of cash withdrawals, it's a good idea to keep a diary fo what you spend the cash on so that you know what budget items to record.

Variable Income

If your income changes, try to pick an average amount. If you have a fixed basic pay and do paid overtime, try to use the same basic pay and then record overtime separately as an average. Do the same with any bonus or commission you earn.

Income paid every Quarterly/4 weeks/Weekly 

Certain benefits, such as housing benefit or tax credits are usually paid every 4 weeks. You'll need to convert these to per calendar month. Read our section below on the basic formulas you can use and also some free calculation tools avaible online.

To convert various payment frequencies to a monthly equivalent, you can use specific formulas based on the average number of weeks or months in a year. Here’s how you convert weekly, four-weekly, quarterly, and bi-annually payment frequencies to per calendar month:

1. Weekly to Monthly

When converting weekly payments to monthly, multiply the weekly amount by the average number of weeks in a year (52), then divide by the number of months in a year (12):

Monthly amount=(Weekly amount ✖️ 52) ➗12

2. Four Weekly to Monthly

Four-weekly means every four weeks, which is not exactly the same as monthly since some months span longer than four weeks. To convert four-weekly payments to monthly, multiply by the number of four-week periods in a year (13), then divide by the number of months:

Monthly amount = (Four Weekly amount ✖️ 13) ➗12

3. Quarterly to Monthly

Quarterly payments occur every three months. To find the monthly equivalent, divide the quarterly amount by 3:

Monthly amount = (Quarterly amount ➗ 3)

4. Bi-Annually to Monthly

Bi-annual payments are made twice a year. To convert this to a monthly amount, divide by 6 (since there are 6 months in each half-year):

Monthly amount = (Bi-Annual amount ➗ 6)

These formulas provide a simple way to estimate monthly equivalents from other payment frequencies, which is particularly useful for budgeting and financial planning.

Income:

This includes all sources of income such as salaries, benefits, wages, bonuses, pensions, and any other incoming cash.

Fixed Expenses:

These are regular monthly bills such as rent or mortgage, utilities, car payments, and insurance premiums that typically do not change much from month to month.

Variable Expenses:

These costs can vary each month, such as spending on groceries, fuel, entertainment, and dining out. Managing these expenses is often where you can find opportunities to save.

Savings and Investments:

Budgets should ideally include a category for saving money that can be used for future expenses like emergencies, retirement, or education. You can only add this category if you have money left over after your essential expenses and contractual commitments.

Debt Repayment:

If you have debt, effective budgeting includes allocating money towards paying down these debts, focusing on high-interest debts first.