Budgeting
If you think living on a budget means cutting out all the good
things in life, think again. It's still possible to cut down on
your spending and go out and enjoy yourself at the same time - it
just takes a little planning.
Find out how a personal budget will help you make the most of
your money and avoid over-commitment. It will also help you plan
for the future and negotiate with any people you owe money to.
Why budget?
With an accurate budget, you'll be able to cut out unnecessary
expenses and save money, or stop running up big debts. If you
already have debt problems, a budget will show you how much spare
cash you have. This will help when you talk to your creditors
(those you owe money to), because you'll be able to make realistic
offers to pay them back over a period of time.
Calculating your personal budget
A budget planner has headings for different kinds of income and
spending, against which you can put your own figures. You'll find
several calculators on the internet, including the
Money Advice Service budget calculator. Choose the one
that suits you best.
Outgoings
Start by working out what you spend: check recent bank
statements, and bills for gas, electricity, telephone, Council Tax,
water rates, insurance and similar expenses. Don't forget to
include anything you pay by standing order (for example, mortgage
or rent payments, loan/hire purchase repayments, or child
maintenance).
The next step is to estimate what you spend on everyday items
(for example, food, clothes, petrol, pet food and newspapers).
Finally, include estimated amounts for unexpected and occasional
costs (for example, Christmas and birthday presents, car and
household repairs, dentist and optician bills, holidays and
outings).
Work out the total outgoings for a full year and divide by 52 or
12 to get a figure for each week or month.
Income
Next list all of your income:
-
check your payslips to get an accurate figure for wages;
-
look at statements for benefits, Child Tax Credit and similar
income;
-
include rent from lodgers.
You should average out any irregular income and ignore one-off
or uncertain amounts.
Work out your total income for a week or a month, then take away
the expenditure to work out whether you have any spare money, or
whether you're over-committed.
Dust off your
debits
If you've got a bank account, take a look at the Direct Debits
coming out of it every month. You may be spending money on a gym
that you haven't been to in three months. You might also be
subscribing to a magazine that you don't really read much. If you
do find some, you can cancel them by contacting your bank.
Direct Debits can also save you money. Many companies, such as
mobile phone providers charge you extra if you don't pay by direct
debit because of the extra paperwork and administration costs. If
you do make regular payments, contact the relevant company to see
if switching to Direct Debit can get you a discount.
Cutting down on entertainment
expenses
Many people just cut out entertaining and socialising costs
altogether when they're looking at what they're spending each
month. Although this suits some people, it might be a good idea to
think about whether you're the kind of person who'll go out on a
spending spree as soon as you do make cuts to your budget.
To spend less on entertainment, try to think of cheaper
alternatives. For example, instead of going out for something to
eat and then to the cinema, how about inviting friends over and
hiring out a DVD? You'll be surprised how much you can save.
If you're at a loose end, it's probably not a good idea to go
window shopping, as you might end up buying something. Why not try
doing something you may never have done before, like visiting a
museum or art gallery.
What to do
with your leftovers
If you've got some spare cash at the end of the month then your
budget is obviously working. To make the most of this money, the
best idea is to put it into a savings account. There are a number of different
accounts and schemes available.
The best option for you depends on the how long you want to save
for and how often you want to gain access to your money.
Once you've put enough money into your savings account, you
could treat yourself to a holiday or replace your old CD player
with a top of the range digital sound system. You can also start
putting money aside for the future and get yourself into the
savings habit.