Budgeting

What is a Budget?

Why should I budget my money?

• It gains control of your finances, it can be as simple as writing it all down.
• Budgets help identify short and long-term financial goals, and structure your finances to help reach these goals.
• To have money for things that you really want, for example clothes, outings and treats.
• To avoid future problems with debt.
• To stop impulse buying.
• If you budget realistically and if you use your budget to guide your expenditure, you’ll be better prepared for emergencies and other unexpected costs. You will also be better prepared for a financially secure future.
• Budgeting helps you discover how to make the most of your money and how to borrow sensibly.

Follow these 3 simple steps to create your personal budget

Step 1

Write down all income (i.e. wages, welfare payments, allowances etc.). If you are on a low income, you may be entitled to money which you are not claiming, such as Living Alone Allowance, Family Income Support etc. Check with your local Citizens Information Centre.

Step 2

Write down all expenditure for a week or month. This is a good way to discover where your money is going. Thoughtless expenditure will become immediately apparent and can therefore be cut straight away.

Look at what you spend, divide essential and non-essential expenditure and consider where you could save money or cut back. Think carefully and make sure you don’t forget anything!

Also include any extra one-off expenditure that you will incur over the year, for example holidays or Christmas.

Step 3

Plan a Budget:

• Using the lists you have made of your weekly income and expenditure, consider what you may be able to save money on.
• If you are considering a new loan, establish if you have the ability to meet the repayments.
• Cut out some non-essential expenditure but be realistic too.

Remember: Everyone needs to eat, buy clothes and have fun. The secret is to see how these things can be done more cost effectively and to not over-indulge.

Top Tips

• Take control - Keep track of everything you are spending. Make a weekly budget for day-to-day costs and non-essential expenditure so you are aware of what your disposable income is.
• If you go over this one-week, make sure you make up for it next week.
• Don’t carry cards around with you. Take out the amount of money you have allowed yourself for the night or week so that is all you can spend.
• If your income still does not cover your expenditure you must consider ways to maximize your income. Make sure you have access to all benefits and tax credits that you are entitled to.
• Part-time work is often the only way left to increase income but should not be done at the expense of your health or home-life.
• Avoid credit cards and store cards and if possible buy everything up front. Beware of interest free credit as when the interest free period ends interest rates can rocket.
• A once off unexpected expense can ruin your budget. Therefore try saving each week/month for a rainy day fund for emergencies and unforeseen costs.