By Ian Williams

[Editor's Note: Since you're reading this on a computer, you may be surprised at the inclusion of the first method. While I personally support the value of doing this electronically, for some people, old-style pre-computer tools make it more real, somehow.

—Shel Horowitz, Editor, Frugal & Fashionable Living]

Anyone who's serious about looking after their finances should have a carefully-planned budget. Planning out your spending month-by-month could help you avoid nasty surprises. On the other hand, not budgeting carefully could pose a risk to your finances and your credit rating - as you're much more likely to miss important payments.

However, different people like to budget in different ways. Here are some of the different ways you could plan out your finances.

The pen and paper budget

Traditionally, everyone used to do their sums with a pen and paper, and there's no reason why that can't work today.

At the start of each month, begin by writing down how much money you have in your account. Below that, write down each of your essential living costs - mortgage/rent, food, bills, etc. - and how much they come to. Now, one by one, subtract each of your essential expenses from the money you have in your account.

What's left is your spending (or saving!) money. Of course, if you find your outgoings actually exceed your income, you should seek professional financial advice.

The spreadsheet budget

If you're computer-savvy, using a spreadsheet to lay out your budget plan could make things much quicker in the long run, not to mention easier to make changes. It works in much the same way as your pen and paper budget, except you'll be noting down each of your costs on your spreadsheet.

An advantage of a spreadsheet is that it can do your math for you, with just a simple formula. If you're not confident about this, don't worry - you can still do the math yourself if you like. Or if you want to learn more about using your spreadsheet to do the sums, there are plenty of free guides available online.

The budgeting bank account

If any of the above seems daunting - or even if you just think you'd enjoy the convenience - there are bank accounts that can do all this for you. A budgeting bank account puts money for essential bills and other living costs to one side, leaving you with an amount you know is safe to spend.

There is often a charge for this service, but it's likely to be less than you'd pay for repeatedly missing payments or going overdrawn if you struggle with your finances. In that respect, it could also help you avoid damage to your credit rating.

What's more, some of these bank accounts don't require a credit check, meaning they're available to people who have struggled with credit in the past. You could look into a no credit check bank account (an alternative example of one can be seen here: www.thinkmoney.co.uk) if you've been rejected for another bank account because of a bad credit rating.

The multi-account budget

If you're feeling really adventurous, an even better way of budgeting could be to split your money into different 'areas' at the start of each month. To do this you'll need to have a number of easy-access savings accounts as well as your main bank account.

For example, you could put money for travel (e.g. fuel, insurance) into one account, money for bills into another, food money into another, and so on. Whenever you spend money on these essentials, simply move the money from the relevant savings account back into your main account.

This allows you to see exactly how much money you have for each of your essentials at any given time. It can be especially useful if you use online banking, as that way you'll be able to see up-to-date balances for each of your accounts whenever you like.

Ian Williams has been working in the financial sector for over 10 years, specialising in helping families manage their personal finances, as well as being a frequent cyclist, and sailor.