Take Time to Fully Understand Where You are Up to
To develop your money management skills, it is important that you fully understand your own financial situation, including your assets (things you own) as well as your liabilities (amount you owe). Your assets may include your bank accounts, savings, and any property you own. Your liabilities can include any credit card balances, mortgages and any loans you have including student loans and car finance.
Take time to review your bank accounts, credit cards, loans/ mortgages on a regular basis to check that you are getting the best deal. As your credit report improves better deals will become available but you may need to seek them out. If you have surplus funds each month, paying extra money off your loans or mortgage could be more beneficial than putting it all into savings and can save you ££££’s in interest.
Importance of Budgeting
Creating a budget can help you stay on top of managing your money. A clear budget allows you to see where you are spending your money and as a result, where you can make savings. There are several apps that do this for you as well as some bank accounts, but we found this free Budget Planner from the Money Advice Service is an excellent tool and easy to use. One of the reasons for poor money management is when your budget is incomplete, when creating a household budget every single home expense should be taken into account, as well as setting money aside for any unexpected costs (e.g., school trip/ boiler breakdown).
Budgeting allows you to take control of your money, it helps to ensure that if the budget is adhered to you will always have enough money for the things you need. Following a budget or spending plan can also help keep you out of debt or contribute to working your way out of debt.
6 steps to creating a good budget plan
- Gather together all statements/ bills/payslips.
Do not be tempted to guess or estimate; have all your bills, bank statements and payslips to hand. The success of the budget relies on accurate figures.
- Is the budget for yourself or your family?
If you have a joint account it can be difficult to determine who is spending what and why, so do it together, in fact get the whole family involved and create a budget together and a plan as to how you’re going to stick to it. This involvement will help to maximise commitment from everyone from the start.
- Be as accurate as possible with your figures
It can be tempting to underestimate your expenditure, but this will lead to an unattainable budget. Be honest from the outset, the more accurate you are the clearer the financial picture you will see.
- Pension Details
Don’t forget to include your pension contributions and if you have a surplus, putting extra money into your pension is a great way to make sure you can live more comfortably later in life
- Budget for big spends, i.e holidays, weddings and one-off spends
Whether it is a holiday, car, or a special birthday treat, we all have one-off spends that can affect our budget planning. Start saving a small amount each month which will account for these spends when they occur, most banks now enable you to save into different pots to keep funds separate.
- Start Saving
Once you have got your budget plan up and running for a couple of months, you should be able to see areas where you can make savings, so it is a good idea to start putting this extra cash away into a savings pot.
If you have links to a credit union through your payroll, this offers a fantastic way to save directly from your salary, it provides a safe, simple, and secure way to save. It is never too late to start saving, start small and watch it build. See our Savings Tips
By maintaining your budget month on month, you should start to understand how you are able to keep your finances on track. You may wish to create a new budget each month, or perhaps you would prefer to map out a spending plan for the next 6-12 months and by opting for a longer-term budget it will become easier to forecast future months finances, for example you may know that one month your car insurance is due so that month may be tighter and you may need to allocate money from other months. By understanding your financial year, it can help you know what months it is beneficial to tighten the purse strings and what months you have some extra cash.
You can then look for ways to help level out the highs and lows in your finances so that things are more even and easy to manage.
Struggling with Debt
If you are experiencing financial difficulties, the first port of call should be to pick up the phone and talk to all your creditors to see if there are any options you can explore such as lower payments, reduced interest rates or payment breaks.
Your credit union or bank might be able to help by consolidating some or all of your debts into one loan, hopefully at a lower APR, meaning one lower, manageable monthly payment. This will help to give you more disposable income, however you need to be aware that you might end up paying more back if you take the loan over a longer period than the original loan.
If the above is not an option, you may find talking to a Debt Adviser could help you sort out your finances as they can give you impartial advice. There is a vast array of advice available, particularly online, but we suggest that you always speak to a free of charge adviser. This would mean if you were to go into a repayment plan, all your repayments would go towards your debt. Please make sure whoever you approach that they are authorised by the Financial Conduct Authority (FCA) to ensure they meet the agreed standards.
Here are a few free services you can use:
StepChange Debt Charity:
www.stepchange.org or 08001381111
www.mymoneysteps.org or 08088084000
www.payplan.com or 08002802816
Debt Advice Foundation
www.debtadvicefoundation.org or 08006226151
Financial wellness Group
www.financialwellnessgroup.co.uk or 0161 804 5464