How to create a budget

The rent is debited at the beginning of the month, but the child benefit is not paid until the middle of the month. At the beginning of the year, the insurances are due, in the summer there are expenses for holidays. And in general, the majority of the income is already planned directly – for rent, electricity and train tickets. Sometimes it is not easy to keep track. 

A budget helps you assess your situation more accurately. You can see exactly where your money comes from and where it goes. What expenses do I have to expect on a monthly or annual basis? Is there any money left at the end of the month? Do I still have funds for further instalment payments? How much money do I spend on a particular thing? What else can I afford? Where do I want to save money in the future? What can I do without?

Typical income
Typical expenses
Free template for your budget
How can you proceed if you want to draw up a budget?
Why is the budget important for debt counselling?

It is usually enough to look at the last three months on the income side. It only makes sense to look at the whole year if your income fluctuates greatly depending on the season (because, for example, as a self-employed gardener you have a lot of orders in summer but everything lies fallow in winter). 

During counselling sessions, it is helpful to have the appropriate documents with you: 

• Monthly income can be proven by: 
  • Wage/salary statements (also for mini-jobs or honorary positions)
  • Outgoing invoices (for the self-employed)
  • Pension notices
  • Social benefit assessments (e.g., ALG I, ALG II or basic benefit)
  • Notification of authorisation for state support (e.g., BaföG or parental allowance)
  • Agreement on maintenance (or a maintenance advance fund decision) 
• Annual or irregular revenues can be, for example: 
  • Taxes 
  • Sickness benefit
  • Operating costs/electricity costs
  • Gratuities, interest

You can also use the sample budget as a checklist. For all items where you have regular income, look for the corresponding notice and take it to your records. 

It is usually sufficient to have a close look at a maximum period of one month on the expenditure side. In addition, there are the expenses, which are only incurred annually/occasionally, but must be planned in advance. For example, if the car insurance is debited in January, you should plan a small amount of savings in the months before to be able to pay the large expense in January without any problems. 

• Monthly expenses
  • Living
  • Food
  • Transport/mobility
  • Telecommunications/internet
  • Subscriptions
• Annual expenditure
  • Insurances
  • Memberships 
• Irregular expenses
  • Clothing
  • Leisure time
  • Holiday

You can also use the sample budget as a checklist. This means you won't forget any annual or irregular items. 

• Variant A: Keep a budget book. Enter every expense and income immediately. You can use a classic budget book or an app for this. Advantage: Just knowing that you'll have to dig out your budget book again prevents many an impulse purchase. Disadvantage: relatively high maintenance and time expenditure and discipline are required here. 
• Variant B: You pay everything cashless for a manageable period of time and use your bank statement as an overview. Advantage: Some spontaneous purchases will also be cancelled here, simply because card payment is still not possible everywhere. Disadvantage: Although the account statements document your cash flows, you still have to sort and analyse the expenditure. 
• Variant C: You collect all receipts and sales slips for a certain period of time (e.g., two weeks), take your bank statements from the last few weeks and create an overview from all these documents. Advantage: You can decide when you want to deal with your finances and don't always have to have a budget book with you. You can track all expenses and income over the long term using the receipts. Even at the bakery, you can now get a receipt, so collecting is getting easier. Disadvantage: If you are not used to collecting receipts, you can quickly forget about it. Discipline and time are also required here. 

The purpose of a budget book is to record all actual expenditure and income for a specific period. The items are assigned to individual categories. For example: "15 May - groceries – 24.95 euros" or "20 November – eating out – 21 euros".  By writing it down and adding it up, you get a good overview of how much money is actually spent on food each month, for example. Try it out: Estimate now how much you spend per month on food, drugstore items or leisure activities, for example. Then, starting tomorrow, write down for a month how much money you have actually spent on food. How well could you estimate the expenses?

A budget is an overview of the average monthly income and expenditure. How much is the monthly rent, the electricity deduction and the instalments for the loans? Annual amounts are calculated down to the month. Is there any income left over after deducting expenses? If not, there is an urgent need for action. The budget can also help harmonise existing expenditure with your own priorities. Are the contributions for the gym more important to me or for a streaming service? Would you prefer a short holiday a year or a subscription to a tanning salon? Would you rather have a coffee to go in the morning or go out for a meal with friends once a month? As long as the expenses are covered by income, there is no right or wrong here.                 

It is essential for the success of debt counselling that you have an overview and knowledge of your income and expenditure. It doesn't matter how you create the overview: the important thing is that you are honest and accurate. Without a realistic picture of your financial situation, no counsellor can give you good advice. 

Be aware that you are visiting a counselling centre because you want to change something about your current situation. It is not about the counsellor wanting to assess your budget. Rather, you can use the budget during the conversation to talk to your counsellor about your financial and personal plans. You yourself know what is important to you. The counsellor can also help you from an independent and objective point of view in assessing whether you can afford this and other expenses in the long term. And the counsellor must know your situation to be able to argue well in negotiations with the creditors. But you always decide for yourself how you use your financial resources and how you plan your budget. And a budget can help you with this. 

Sources: BAG-SB (text), German Caritas Association (video)