Budgeting for Household Bills: A Practical Approach
Bills are easier to manage when you know what is coming. Here is how to track your household costs and build a budget that actually works.
List all your regular bills, work out monthly amounts, and set money aside before spending on anything else. The actual method matters less than doing it consistently. Automate what you can so bills get paid without you thinking about it.
Most people have a rough idea what their bills cost. Fewer have a clear picture. Actually writing it down reveals patterns and helps prevent those months where everything seems to hit at once.
List Your Regular Bills
Start with everything you pay regularly:
Monthly bills:
- Rent/mortgage
- Council tax
- Energy (gas/electricity)
- Water
- Broadband
- Mobile phone
- TV licence
- Subscriptions (Netflix, Spotify, gym, etc.)
- Insurance (if paid monthly)
Annual or less frequent:
- Car insurance
- Home insurance
- Car tax
- MOT and servicing
- TV licence (if paid annually)
- Subscriptions (Amazon Prime, etc.)
Write down what you actually pay, not what you think you should pay. Check bank statements if you’re not sure.
Calculate Monthly Costs
Convert everything to monthly amounts:
| Bill | Frequency | Amount | Monthly Equivalent |
|---|---|---|---|
| Energy | Monthly | £150 | £150 |
| Car insurance | Annual | £480 | £40 |
| Council tax | 10 months | £150 | £150 |
| Water | 6 monthly | £240 | £40 |
For annual bills, divide by 12. For 10-month council tax, either budget the same every month or the actual amount for those months.
Add up all the monthly equivalents. That’s your baseline bills cost before you buy anything else.
Set Money Aside First
The simplest budgeting approach: pay bills before spending on anything else.
When you get paid:
- Transfer bills money to a separate account (or keep it mentally ring-fenced)
- Set up direct debits from that account
- What’s left is for everything else
Some people use multiple accounts:
- Bills account (fixed outgoings)
- Spending account (daily expenses)
- Savings account (if possible)
Others keep everything in one account but track what’s allocated where. The method matters less than the discipline.
Dealing With Seasonal Variation
Some bills change through the year:
Energy - Higher in winter, lower in summer. If you pay by fixed direct debit, this is smoothed out. If you pay on use, budget for higher winter costs.
Water - Higher in summer if you have a garden and a meter. Otherwise fairly stable.
Council tax - Nothing in February and March if you pay over 10 months. Budget this as if it were 12 months to avoid the “extra” money temptation.
A fixed monthly budget assumes costs average out over the year. This usually works, but keep a buffer for unexpectedly harsh winters.
The Buffer
Things go wrong. Boilers break. Cars need repairs. Having some buffer prevents a bad month from becoming a debt spiral.
Minimum buffer: One month’s bills in reserve.
Better buffer: Three months’ essential bills.
Building this takes time. Even £20 a month adds up. A buffer turns emergencies into inconveniences.
When Bills Exceed Income
If total bills are more than income, budgeting alone won’t fix it. You need to:
- Reduce bills - Switch suppliers, cancel subscriptions, move to smaller home
- Increase income - More hours, second job, benefits you’re entitled to
- Get help - Debt advice, hardship funds, support schemes
Don’t juggle debts to pay bills. If you’re borrowing to cover basics, seek advice from Citizens Advice or StepChange before things escalate.
Tools and Apps
Various apps help track spending:
- Banking apps (most show categorised spending)
- Dedicated budgeting apps (YNAB, Emma, Plum)
- Spreadsheets (free, flexible, requires effort)
- Pen and paper (still works)
The best tool is whichever one you’ll actually use. A complex app you abandon after a week is worse than a simple notebook you check daily.
Reviewing Regularly
Circumstances change. Bills change. Review your budget:
Monthly: Check you’re on track. Adjust if needed.
Quarterly: Look for patterns. Any bills creeping up? Any you’ve forgotten?
Annually: Full review. Compare to last year. Cancel anything you don’t use.
Most people set a budget once and never update it. The review is where the real value comes - catching problems early.
Common Mistakes
Forgetting annual bills - Insurance renewal hits and there’s no money. Split annual costs across 12 months.
Not accounting for increases - Energy prices rise, council tax goes up. Build in 5-10% contingency.
Being too optimistic - Budgeting £100 for food when you always spend £150 just leads to frustration.
Counting irregular income as regular - Overtime, bonuses, and tax refunds are extras, not baseline.
No buffer for emergencies - First crisis blows everything apart. Build the buffer slowly.
A Simple Template
If you want a starting point:
| Category | Monthly Budget |
|---|---|
| Housing (rent/mortgage) | £_____ |
| Council tax | £_____ |
| Energy | £_____ |
| Water | £_____ |
| Communications (broadband, phone) | £_____ |
| Insurance | £_____ |
| Transport | £_____ |
| Food | £_____ |
| Subscriptions | £_____ |
| Buffer/savings | £_____ |
| Total committed | £_____ |
| Income | £_____ |
| Remaining for other spending | £_____ |
Fill this in honestly. The “remaining” figure is your actual disposable income.