How to Budget When You’re Living Payday to Payday

Living payday to payday can feel overwhelming, but a simple budget can help you regain control of your finances.
By tracking your income and spending, you can make better financial decisions and start building a more stable foundation for the future. Below are practical steps to get started, along with some important information about payday loans.
Step 1: Calculate Your Income
Start by identifying all your income sources.
This could include wages, benefits, or side jobs.
Add them together to get a clear picture of your total monthly income.
Step 2: List All Your Expenses
Write down all your expenses.
Begin with essentials like rent, bills, groceries, and transport.
Include non-essential items such as entertainment or takeaway meals.
Remember to account for occasional costs, like gifts or maintenance fees.
Step 3: Compare Income to Expenses
Check if your expenses exceed your income.
If they do, focus on cutting back on non-essential spending.
Small changes, like making coffee at home or cancelling unused subscriptions, can add up over time.
Step 4: Create a Spending Plan
Allocate a specific amount to each category of spending.
For example, set aside £50 per week for groceries or £40 per month for leisure activities.
Stick to these limits and track your spending regularly to ensure you stay within budget.
Suggested Income Allocation Chart
Category | Percentage of Income |
---|---|
Essential Expenses | 50% |
Debt Repayments | 20% |
Savings | 10% |
Non-Essential Spending | 20% |
Step 5: Automate Payments and Use Cash Where Possible
Set up direct debits for bills to avoid missing payments and incurring late fees.
You can also try the envelope method. Withdraw cash for categories like food or travel, and place the money in labelled envelopes. Spend only what’s in each envelope for that purpose.
Building a Safety Net
Start a small emergency fund by saving a little each payday.
Even £5 or £10 per payday can make a difference over time.
This safety net can protect you from relying on credit when unexpected costs arise.
Managing Payday Loans
What Are Payday Loans?
Payday loans are short-term loans designed to cover urgent expenses until your next payday. They can seem like an easy solution if you’re short on cash, but they often come with high interest rates and fees so it’s best to avoid them if you are already struggling with affordability at the end of the month.
What to Consider Before Taking a Payday Loan
- Cost: Payday loans are typically more expensive than other forms of borrowing. Make sure you understand the total repayment amount.
- Alternatives: Before borrowing, explore other options, such as budgeting adjustments, borrowing from friends or family, or seeking advice from a debt charity.
- Repayment: Only take a payday loan if you are certain you can repay it on time. Late repayments can lead to extra fees and impact your credit score.
What to Do If You Struggle With Payday Loan Repayments
If you’re unable to repay a payday loan, speak to your lender as soon as possible. They may offer a repayment plan. You can also contact a free debt charity for advice.
Managing Debt
If you have existing debts, include repayment in your budget.
Focus on paying off high-interest debts first, as these cost more over time.
Consider consolidating debts if it will reduce overall interest and make payments more manageable.
Review and Adjust Regularly
Track your spending weekly or monthly to ensure your budget is working for you.
If your income or expenses change, adjust your plan accordingly.