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Managing a household financially is a tricky job that needs to be kept on top of regularly to ensure you keep yourself afloat and out of debt. However, many people don’t budget their personal finances effectively (and some not at all). It’s amazing how much you could save by watching what’s coming into the household and what’s being spent. In this article we outline how to budget and manage your finances successfully. Your first decision is your budgeting period, which can be whatever you choose. If you’re paid by the monthly you’ll probably find it easiest to do a monthly budget, whereas if you’re paid by the week, you might want to do a weekly budget. Get some paper and note down the heading ‘income’. Now list all the money that you have coming into the house during your budgeting period. This may not just be salary – it could be a pension income or benefits. Now write down another heading – ‘expenditure’. List everything that you spend money on in one budgeting period. You may have some bills that are paid annually or quarterly rather than monthly or weekly. If this is the case, work out their average cost per month or week. Here are some examples of outgoings that you may have: • mortgage repayments or rent Add up the totals for both lists and then subtract the expenditure total from the income total. The amount that remains is yours to do with as you wish. You may want to spend it or you could save it. If the result is a negative figure, you’re spending more than you can afford and you won’t be able to keep this up for long. You’ll need to go back over your finances as a matter of urgency to see where you can cut down on your expenditure before you end up in debt. Here is some advice on how you could do this. • Every penny counts – small amounts eventually add up to large amounts. Saving even just a tiny amount is good. To improve your saving discipline, start a regular standing order to your savings account. • Don’t touch your savings unless you really, really need to. This will make your savings grow more quickly in interest. • Cut down on extravagances such as going to restaurants, ordering carry out meals and buying convenience foods. It’s so much cheaper to prepare meals yourself – and much healthier for you too. • Set yourself a budget limit for luxuries, based on what you can afford. You don’t need to buy clothes, gadgets or music every month. • Don’t get sucked into the marketing lure of buying big name brands or exclusive makes. More often than not, the quality is no better and the only differences are the prestigious name and the price tag. This applies to clothes as well as food and other household items. • Get up a bit earlier in the morning to prepare sandwiches rather than buying your midday meal at work. Alternatively, make your sandwiches the night before. Also, drink the free drinks provided at work – water is very good for you, and if your company offers free hot drinks, take advantage of this generosity. • Tobacco is very expensive, especially if you smoke heavily. Do what you can to kick the habit or at least cut down. • Do an energy efficiency review of your home. Use energy efficient light bulbs. Switch off lights and other equipment when not in use. Tumble dry as little as possible. Don’t leave the heating on when you’re not at home. • If you’re on a low income, pop along to your benefits office to see if you could be eligible for any additional support from the government. • Take advantage of government incentives to help you save, such as Individual Savings Accounts (ISAs), in which you can save money tax-free. • Change your attitude towards windfalls and bonuses. See them as ways to boost your savings rather than as extra cash to spend. • Avoid credit cards if you can. If you really need to use a credit card, watch your spending carefully and do your best to pay off the full balance so that you don’t get charged interest. • Review and amend your budget regularly. Your personal situation and needs – and undoubtedly therefore your financial requirements – will change every so often. If, despite your best efforts, you’re continuing to struggle with managing your finances, don’t ignore the problem. Confront it before your debts build up too much. Even if you feel you can’t approach a friend or family member to confide in, there are plenty of independent organisations that offer free and confidential advice and assistance with money issues, such as the National Debtline, the Citizen’s Advice Bureau and the Consumer Credit Counselling Service. This article is copyright protected and is not for republishing |
