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| Budgeting for your Personal Finance |
By:
Benedict Rohan |
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Most of us find ourselves having to part with our hard-earned cash
almost on a daily basis to just keep ourselves going. Have you ever
thought about exactly what you’re spending though? A great deal of
people never bother to budget – yet they could find themselves a lot
better off by keeping an eye on their income and outgoings. If your
finances are starting to get the better of you and you want to know how
to manage your money more effectively, read on.
Work out your income and outgoings
First, decide whether you’ll do a monthly or weekly budget, whichever
suits you best. Then write down all your income. (e.g. salary,
benefits, pension). Now list your outgoings (home loans, remortgages).
Don’t forget those that you only pay on an annual or quarterly basis –
which you’ll need to break down to a weekly or monthly amount. Here are
some common household expenditures:
mortgage or rent
home insurance
council tax
utilities (gas, electricity, water, phone)
TV licence
car tax
car insurance
petrol
car parking charges
travel to work (public transport)
credit cards
overdrafts
loan repayments
groceries
childcare
pocket money for kids
vet bills
luxuries (going out, clothes, presents)
holidays
Tally up your total outgoings and subtract them from your income, and
what’s left over is yours to spend – or save if you’re wise. If your
outgoings are more than your income, alarm bells should be ringing. You
won’t be able to sustain this on a long-term basis and you’ll quickly
find yourself in more and more debt. Now is the time to sort it out.
You know where you stand with your income and outgoings, so you can now
make changes and improvements to the way you manage your money. Below
are some tips to help you cut down your spending and increase your
savings.
Save, not spend
There are lots of ways in which you can live more efficiently, and a
little goes a long way – if you save just £1 a day, you’ll have
£365 in a year! So everything counts:
Cook at home rather than buying ready meals and takeaways or eating
out.
Cut down on your treats – CDs, clothing, make-up etc. The best way
in which to do this is to give yourself a budget and stick to it.
Don’t buy designer labels or expensive brands – cut down by
purchasing high street clothes or the supermarket’s own brand of
groceries.
Just make your own lunch, or don’t buy coffee at work, and you’ll
easily save it.
Give up smoking – it’s an expensive habit.
Switch off unneeded lights in your house.
Find out whether you’re entitled to any benefits. The government
has various tax credits and allowances for individuals and families on
low incomes.
Open a savings account if you don’t have one and set up a standing
order to ensure that some of your income goes there every week or month.
Tax-free savings accounts such as ISAs (Individual Savings
Accounts) allow you to save a certain amount each year without paying
tax.
Leave your savings alone – once they’re in your savings account,
they’re untouchable. The more you have, the more you’ll make in
interest.
Check regularly how your savings are performing and move to a bank
account with a better interest rate if necessary.
If you get a bonus or extra cash, put it in your savings before
you’re tempted to spend it.
Don’t buy anything on credit unless you really have to – and only
then if you know you will have the means to pay it back. It’s a much
more expensive way to shop, as you’ll pay back more in interest.
Most people start to have problems with debt when there’s a major
change in their life circumstances, such as getting married, changing
job, moving house or starting a family. If any of your circumstances
change, revise your budget and make any necessary adjustments.
If you’re still struggling …
… don’t sweep the issue under the carpet. The longer you ignore your
money problems, the bigger your debts will get. We live in an expensive
world nowadays and many people struggle to get by – so there’s nothing
to be ashamed of. There are lots of organisations who can provide
specialist help on debt management – for example the government
Insolvency Service, Consumer Credit Counselling Service and the
Citizen’s Advice Bureau. They’ll give you free practical advice to help
you get your finances back on track.
The first thing to do is to make a list of everyone to whom you own
money, and sort the list into priority and non-priority debts. Priority
debts are those that are secured against your home or could have
serious consequences such as you being evicted or taken to court, and
these must be tackled first.
Then speak to your creditors, for your priority debts first. They’ll be
a lot more understanding if you explain your situation to them than
they would if you tried to ignore their payment demands. Run through
your budget and try to negotiate a repayment plan that’s manageable for
you.
Once you’ve managed to repay all your debts, don’t let yourself get
caught in the same vicious circle again. Live within your means, don’t
be tempted by credit or ‘buy now, pay later’, and keep a close eye on
your budget and expenditure.
Biography:
Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages |
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