Don't forget to include food expenses

• Making a budget means you are on top of your money - not chasing it
• Find out what to do if you have surplus cash
• Find out what to do if your outgoings are bigger than your income

With the post-Christmas credit card bills on their way, one of the best and easiest ways to get on top of your finances and beat the debt is to make a budget. If you stick to it, a budget can save your finances from crashing and burning. But only if you really do keep to it!

The key to getting out of debt and keeping it that way is to spend less, save more and, ideally with a little help from moneymagpie, make more money. A budget is the foundation and starting point of a richer life for you and your family. Follow our step-by-step guide to making a budget and getting out of debt:

 
Step one: Work out your current incomings and outgoings

Your first task is not a fun one, unfortunately, and might take a little bit of time to get right. This is where you need to put down everything you earn and everything you spend each month. You can do it on a piece of paper (maybe one of those envelopes in the drawer containing another nasty bill/statement) or you can do it online on one of the many budget calculators around. This one from the Financial Services Authority (FSA) is rather good.

Draw out two columns, one for incomings and one for outgoings. In the incomings section, write down an entire list of any money that goes into your bank account on a regular basis. Leave out any money you might get from your Nan on your birthday, or your regular rummage down the back of the sofa. These are the kind of things you should include in your incomings section:

• Wages
• Investments
• Benefits
• Tax credits
• Alimony
• Pension

And these are the things you should have in your outgoings section:

• Mortgage/rent
• Utility bills
• Council tax
• Home phone/internet/TV bill
• Mobile phone bill
• Insurance
• Transport
• Childcare
• Food
• Clothes
• Entertainment
• Alcohol/Cigarettes
• Loans/credit cards

Unless you’re reasonably accurate with your budget it’s a waste of time doing one, so make sure that any figure you write down is as close as possible to what it actually is – no cheating! Another good tip is always to underestimate incoming payments and overestimate outgoing payments so that you don’t get caught out unexpectedly.

It might take some time, but refer to receipts, bills, bank statements – any information that’s more trustworthy than your memory.

Step two: Add it up

Now, add up all the amounts in your incomings column to work out how much money you have coming into your account every month (or just press the 'calculate' button online). Next, add up everything in the outgoings section. In theory, the incomings section should total more than the outgoings section, that's the ideal anyway. However, do not panic if it's the other way round. You're not the only one and you can do something about it. Simply read on to find out what to do next.

Step three: What to do if you have money left over

Firstly, you smile and feel rather smug, thank you. You’re one of the rare few that already have their finances in pretty good order. Although that's not to say that you couldn't do better. It is still worth comparing prices for your utility bills, switching your bank account to a better one and taking out a credit card that rewards you for spending rather than one that just takes your money.

Any money you have left over could either be spent on the finer things in life or for added security, be put into a high interest savings account. We like the ICICI bank which is the top performer at the minute with a rate of 6.41%. Any money you save could go towards a holiday abroad, a new car, or even just security for the future.

Step four: What to do if your outgoings exceed your incomings

Whatever you do, don’t panic. Hundreds of thousands of people are facing the same kind of situation and it is fixable. The first step you should take is to write out all your regular outgoing payments on a piece of paper, and brainstorm all the different ways you can cut down for every aspect. For some, you won’t be able to cut down the costs, i.e. if you don’t pay your council tax you could end up in court. But for other elements it’s really easy to cut down.

Here are some ideas to get you started:

• Switch your energy supplier by using our price comparison pages and save up to £170 a year

• Switch your broadband internet provider by using our price comparison pages and save up to £120 a year

• Have a look at our mobile phones article to help you get the best deal when you renew your contract  

• Use our price comparison pages to find yourself the best deal on any insurance policies you might have 

• Cut the costs of driving down by getting ads put on your car or sell the one you’ve got for a cheaper and more economical model

• Visit our ‘smart spending’ section and look for other ways to save money

Step five: Make more money

If after switching all your providers and doing whatever you can to cut back you still find that your outgoings exceed your incomings, you will need to find some way of increasing your earnings. Visit our ‘making money’ section to find loads of different ways of earning some extra cash. There is something for everyone there: whether you're stuck at home, working full-time, a student or even at school, you will be able to make some more cash.

What now?

• Do a budget on paper or online with the Financial Services Authority's budget calculator
• Switch your energy provider to save money
• Switch your insurance policies to cheaper ones
• Switch your credit cards to 0% deals
• Set up a savings account for the future