With a steadily increasing cost of living, it is important for everyone to know
how much money they have and how much they need in order to live. For those with
debt, this is all the more important as the repayments will have an impact on disposable
income. The best way to ensure that there is enough money at the end of the month
to cover all essential expenditure is to create a budget.
Creating a budget plan is not difficult. There are many free templates available
online, and it only takes a bit of time to sit down and calculate income versus
The first step in a successful budget plan is to list all expenditure. The best
way to do this is too refer to recent bank statements to get a list of regular utility
bills, taxes eg council tax, insurance, rent/mortgage, telephone and water rates.
Any other regular direct debits and standing orders should also be included at this
stage, as well as any loan or credit card repayments. Things like food shopping
and other day to day expenditures such as fuel and/or transport costs should be
estimated. If medical bills are common, include these as well. It may also be worth
considering occasional expenses such as the Christmas or birthday budget. It should
be fairly straightforward to calculate the average monthly spend based on this information.
Calculating monthly income is the most straightforward. Salary, allowances such
as child tax credit, income from a lodger and so on should all be included. If an
individual has an irregular income, for example a commission based salary, it is
best to try to average out the amount over the course of twelve months.
Hopefully, when the monthly expenditure is deducted from income, there will still
be money left over. However in many cases, there may be a shortfall. If this is
the case, it is clear the individual is spending beyond their means and this will
only result in increased borrowing. Should this be the case, then it is important
to prioritise the expenses. Things like the mortgage or rent will clearly be at
the top of this list, followed by utilities bills and food. Any expenses that are
unnecessary, such as satellite television or other non essential services should
be cancelled in order to cover the essentials.
There are also many deals and offer to take advantage of. It may be worth buying
own brand goods such as food and clothes, or go to a different supermarket to take
advantage of their offers. Planning for the weekly shop can also be worthwhile.
Set a food budget for the week, plan meals and make a list. Try to limit treats
to special occasions and think carefully before making any impulse buys.
By carefully budgeting, it is possible to avoid getting into difficult financial
situations. There are many free services available to those looking for help, for
example the Citizens Advice Bureau, National Debtline and The Money Advice Service.