How To Create A Monthly Budget
Creating a
budget will be very helpful as a step towards you regaining control
of your finances. Much of the information you gather
during this process will be required by debt management companies
if you choose to use them, so it is absolutely worthwhile. Here are
some simple steps for developing your own monthly budget.
Firstly, calculate your income. This includes all of the money you earn in a month after taxes (including salary, tax credits, benefits, and interest from investments).
Next, calculate your expenditure. Make a note of all the money you realistically spend per month; you can keep track by taking a notepad and pen around with you, or by saving all of your receipts for a few weeks. Remember to include occasional payments such as presents, holidays, car tax and MOT.
When you've worked out your income and expenditure, subtract the total expenditure from your total income. Anything left over is your disposal income. This is money that is available to offer your creditors to pay off your debts. If you don't have any disposable income, it is essential that you begin to make cuts, and if at all possible, consider ways in which you can increase your income (eg. by renting out a room in your house, or working overtime).
You can manage your expenditure by assigning yourself an upper limit for how much money you will spend in any given circumstance. This is part of the practice of budgeting. Divide your outgoing payments into categories (food, housing, clothes etc.), estimate an accurate maximum cost for the month, and refuse to go beyond this maximum. If you do need to spend extra money in one category, for whatever reason, lower the amount you have permitted for another category where you can afford to go without. Successful budgeting will require some sacrifices!
The first month of using a budget may be hard work. If you have never kept track of your spending before, it will take practice. Remember that you are working for your own long-term benefit, rather than instant results. Over time, you may notice some discrepancies within your budget, for example, instances where your initial estimates were out. Make sure you revise your budget as you develop a clearer picture of your earning and spending patterns.
Our interactive budget planner is currently in the works, however in the meantime we recommend using Martin Lewis' budget planning tool available here.
ABOUT TRUST ONLINE