How can I set up a budget plan to try to reduce my outgoings?

How can I set up a budget plan to try to reduce my outgoings?

Summary: This article explains ways to plan monthly expenditure to ensure overspending does not occur, thereby reducing the risk of getting into financial difficulty.

Anyone that feels they are struggling on a month to month basis will often benefit from reviewing their income and outgoings and establishing a budget. In fact, even those in a relatively comfortable financial position will often benefit from having a monthly budget in place. There are many sources of budgeting templates available on the Internet for free download, and with a bit of time invested in the planning, struggling to meet the end of the month bills will hopefully be a thing of the past.

Calculating monthly income

In order to establish a budget plan, it is important to know what income is being generated in the household. The first step is to review all recent payslips. Any other source of income should also be included, such as maintenance, tax credits, rent from a lodger etc. Where an individual has an irregular income, an average monthly amount should be calculated.


Calculating monthly expenditure

This step can take a bit more time, and it is vital to include all expenditure no matter how small and insignificant it may seem. For irregular bills that are paid less frequently, for example a quarterly TV license, divide the annual amount by 12 and set aside that amount each month. Referring to bank statements and recent utility bills are the best way to establish outgoings and it is also worth taking into account Christmas and birthday expenses, as setting aside a small amount each month will mean they will be far less of a burden. Also, debt repayment, any other direct debits and bills should be taken into account. Food and household expenses should also be estimated. This should be fairly easy to work out if referring to recent bank statements.


What happens if my outgoings are more than my income?

If this is the case, the first step is to prioritise expenses. The most important is likely to be the mortgage or rent, closely followed by council tax and utility bills (gas, electricity and water). At this stage, telephone or mobile phone bills should not be considered a priority unless vital for work purposes. A reasonable monthly allowance for food and household goods should be estimated, and once a budget has been decided, it should be adhered to. Debt repayment should also be included at this stage. If there are any savings available, it may be worth considering paying off some of the debt to reduce the monthly burden. Non essential expenditure, such as Satellite or cable TV, regular meals out or takeaways, and any other none essential services should be reduced or cancelled where possible in order ensure that income covers all outgoings.


For anyone facing financial difficulties, there a numerous sources of help that are available, both online and in person, such as the Citizens Advice Bureau (CAB).

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