How to Budget When You’re Broke

Why Budgeting Matters — Especially When You’re Broke

When your bank balance is running low, it’s tempting to avoid looking at it altogether. But burying your head in the sand can make things worse. Budgeting helps you:

• See exactly what’s coming in and going out.

• Prioritise essentials like rent, food, and utilities.

• Spot areas to cut back or get support.

• Make informed choices instead of reacting to financial stress.

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If you don’t yet have a structured way to track spending, our Budget Template is a simple, ready-to-use tool that helps you see the full picture instantly.

Step 1: Know Your Exact Financial Position

The first step is honesty — you need to know exactly where you stand:

1. Gather your information. List your income from all sources, even if it’s inconsistent (wages, benefits, side gigs, etc.).

2. List every outgoing. Check your bank statements for regular payments like rent, council tax, utilities, mobile phone, subscriptions, loans, and debt repayments.

3. Note any irregular expenses, such as car MOTs or school uniforms, and estimate their monthly cost by dividing the total by 12.

Once you’ve got all of this in one place, you’ll see the gap — how much is left (or not) after essentials. It can be uncomfortable, but it’s the crucial first step.

Step 2: Prioritise Essentials

When you’re broke, you can’t pay for everything — so you need to make tough but smart decisions.

In the UK, your priority bills are:

• Rent or mortgage – keeping a roof over your head comes first.

• Council tax – non-payment can lead to court action.

• Gas and electricity – essential for safety and warmth.

• Food and water – basic needs must be met.

Everything else — like streaming subscriptions, non-urgent debt, or nights out — goes further down the priority list.

If you’re struggling with any of these priority bills, contact the provider early. Many offer hardship support programmes or payment plans. Citizens Advice and StepChange can help you understand your options if you’re behind on payments.

Step 3: Create a “Survival Budget”

A “survival budget” is a bare-minimum financial plan that helps you stay afloat while building stability. Here’s how to create one:

1. List all essential spending. Include only what you truly need for day-to-day living — housing, utilities, food, and travel for work or school.

2. Cut or pause non-essential spending. Cancel subscriptions, reduce takeaway meals, and pause unnecessary purchases.

3. Allocate a small buffer. Even £10–£20 a month can cover unexpected costs like an emergency bus fare or a child’s school trip.

Once your immediate needs are covered, use any leftover amount to start:

• Building a small emergency fund. Even saving £1 a day makes a difference.

• Paying down high-interest debt. Start small — it adds up over time.

For a ready-made structure to plug your numbers into, download the Next Steps Budget Template, which automatically calculates where your money is going and highlights where to cut back effectively.

Step 4: Cut Costs Without Compromising Survival

Here are some UK-specific tips to reduce essential costs:

• Utilities: Use comparison tools like MoneySuperMarket to find cheaper providers. Contact your energy supplier to ask about grants or payment plans if you’re struggling.

• Council tax: Many people qualify for Council Tax Reduction schemes through their local council — check your eligibility online.

• Food: Plan weekly meals, opt for supermarket own-brand products, and use apps like Too Good To Go for discounted groceries. We wrote a full article on How to Save Money on Groceries in the UK.

• Transport: If you rely on public transport, consider railcards or bus passes that reduce daily costs.

• Phone and internet: Review your current contract and switch to cheaper SIM-only or social tariffs.

These changes can free up cash to tackle debts or build a safety net.

Step 5: Find Extra Income Sources

When money’s tight, trimming expenses can only go so far. If you’ve cut back as much as possible, focus on boosting your income.

• Check benefits or tax credit eligibility. Use entitledto.co.uk to see what you might claim.

• Look for local side hustles. Pet-sitting, tutoring, or delivering groceries can supplement income.

• Sell unused items. Websites like Vinted, eBay, or Facebook Marketplace can quickly generate cash.

• Speak to your employer. If overtime or flexibility is an option, it may provide short-term relief. Read more on How to Increase Your Income.

Even small extra income streams can close your budget gap and reduce financial stress.

Step 6: Plan for the Future

Once you’re back on top of essentials and have stopped the financial bleeding, you can shift from survival to stability:

1. Reintroduce simple savings goals – start with a £100 emergency fund, then grow gradually.

2. Review your debts regularly. Use free debt advice services such as StepChange or National Debtline to create a sustainable repayment plan.

3. Check your credit report through Experian or ClearScore to track progress.

4. Review your budget monthly. Update income, spending, and priorities. You’ll likely spot new opportunities to save as your situation improves.

The Key Takeaway

Budgeting when you’re broke isn’t about perfection — it’s about progress. Every pound has a purpose, and every small step counts. You can’t control what you don’t measure, and even the act of listing expenses gives you power over your finances.

Start with survival, get organised with a reliable tool like our Budget Template, and slowly build towards security and freedom.

It might feel overwhelming today, but remember — thousands of people across the UK have started from the same place. The difference between staying stuck and moving forward is simply taking that first step.