How to draw up your own budget
OF YOUR SPENDING? VICKY SHAW GETS SOME EXPERT FINANCIAL PLANNING TIPS TO HELP
MORE than half (59%) of households don’t have a budget they stick to each month, according to new research.
But, with a number of bills increasing from April, and many of us already feeling the strain, it could be time to take a close look at your costs and spending?
Bills for services such as council tax, water, mobile phones, broadband and stamps have jumped this month, causing headaches for lots of Brits.
Many of the biggest broadband firms raise prices every April, with comparison website Uswitch calculating that the increase will cost the individual consumer around £27.19 more a year for broadband and £24.23 for mobile bills on average.
Having a budget in place can help you gain a sense of control over your finances – and over a quarter (27%) of people say rising costs have actually prompted them to start budgeting, a poll for wealth manager RBC Brewin Dolphin in February reveals.
When looking at what’s stopping people creating a budget, 14% say they don’t have the time, and one in 20 (5%) simply don’t know how.
However, it might not be as complex as some might believe.
“Having a budget is the foundation stone of planning your household finances,” says Carla Morris, financial planner at RBC Brewin Dolphin.
“It gives you a month-to-month breakdown of your income and outgoings, making it easier to manage your money, identifying where savings could be made, and giving you a clear view of how much you should be able to contribute towards long-term financial goals.
“It is worrying that so many households do not have one in place, particularly given the financial pressures many have been put under in the past few years.”
Here, Carla shares top tips for getting on top of your budgeting…
1.Take it back to basics
Carla says: “Coming up with a budget can be as simple as looking through what goes into your bank account every month, and what goes out. Make a budget work for you.”
You can use software, or even just a notepad to write things down. “There is no right or wrong way to do it so long as you have the right information,” Carla adds.
It’s also worth seeing what free budgeting tools are available online. The Government-backed MoneyHelper website has a budget planner page, while MoneySavingExpert. com has a budget planner spreadsheet available.
It’s important to be honest with yourself about your true financial situation when using budgeting tools, so make sure you are factoring in all of your spending.
2.Can you boost your income?
If you regularly have more money going out than coming in, this could soon lead to problems.
“If your budget is not in surplus, then it’s unsustainable,” says Carla.
“If you want to increase your income and your job allows for extra paid hours, that could be one option. Alternatively, you could look at starting a small business or project, although this may require some money up front, or selling belongings through services like
Vinted, Depop, or eBay.”
3.Can
you cut your spending down?
“Sometimes it’s just not possible to increase your income, so cutting spending is the only option,” Carla adds. “Look through your direct debits – what are they for, and do you really need them?
“If you subscribe to multiple streaming services, cutting down to one may be a straightforward way of saving yourself hundreds of pounds per year.”
4.But be careful what you cut
“If you are cancelling direct debits, keep in mind how they fit into your long-term goals. Insurance can be among the first things people look to cut, but don’t sacrifice a benefit that may pay off in future years for a relatively modest short-term gain,” Carla cautions.
“Likewise, try to avoid cutting contributions to your pension, as small cuts now may make a big difference further down the line.”
5.Prioritise expensive debt
Carla suggests checking the interest rates on debts and prioritising the highest-interest ones when clearing them.
If you’re struggling, contact your lender to discuss the options and consider speaking to a debt help charity.
6.Get what you are entitled to
In addition to Carla’s tips, make sure you are not overlooking important benefits which could help your budget to go much further.
For example, some older people on low incomes who would be eligible for income top-ups do not claim Pension Credit, which gives extra money to people over state pension age. Find out more about how to claim at gov.uk/pension-credit.
7. Seek help early on
If you’re finding that you simply can’t balance your budget, no matter how hard you try, make sure you get help as soon as possible, to help prevent yourself sinking into a debt spiral.
Charities such as StepChange Debt Charity, the National Debtline which is run by the Money Advice Trust and Citizens Advice can help.
Avoid cutting contributions to your pension, as small cuts now may make a big difference down the line