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That’s why we have taken the time to create this guide on how to budget!
We’ll be covering the dos, the don’ts, and some other general tips to help you on your way to being in control of your finances.
The reason why budgeting is so important.
The number one reason that having a budget is so important is that it allows you to know how much money you actually have so you can avoid overspending and getting yourself into a difficult situation. It also allows you a breath of fresh air if you often find yourself without enough money to do the things you enjoy, whether that is going out with family and friends, buying presents for birthdays or even being able to afford the essential things like any mortgage/rent payments, gas and electric or even just being able to buy food for the week.
The sad truth is, money management and mental health problems are often linked. There are statistics from a designated charity called the Money and Mental Health Policy Institute showing that 1 in 4 people with a mental health problem also have problem debt (debt they cannot afford to pay back). The studies also show that people with a severe mental illness are 2.3x more likely to experience money problems or debt.
It’s a vicious cycle that we believe no one deserves to be stuck in and one of the driving factors we have dedicated this post to money management.
So, how do you create a budget?
Now that you’ve seen why staying in control of your finances is so important, you may be left wondering “where do I start?”. This is the first hurdle that a lot people can’t seem to get past. That’s because some people just look at their money as a collective amount and get immediately overwhelmed.
So, how do you break it down into a monthly budget? We have set some bullet pointed steps below of questions you will need to ask yourself when creating a monthly budget:
• How much money do I receive each month? (this may be from earned income, benefits, investment returns or pension)
• What are my essential weekly/monthly expenses?
• What are my optional weekly/monthly expenses?
• Do I have any money left?
• Do I want to save any of the money left over?
• Are there any events coming up that I need to save or plan for? (Birthdays? Holidays?)
• Do I have enough for emergencies? (e.g. Car breakdown, boiler repair/replacement)
That may seem like a lot to consider, but it’s actually very simple. By breaking down each step you will begin to know your income and understand how it fairs against your outgoings, which in turn will allow you to start taking control of your finances.
Going forward we will tackle each bullet point and talk about them in detail, giving advice and guidance along the way.
How much income do I receive each month?
The first bullet point is the foundation of creating a budget – without this information you cannot begin to take control of your finances. You will need to work out how much money you have for each passing week/month of the year, depending on how frequently you receive your income, after tax.
To calculate these, we have provided you with some links to a budget planner in the form of an excel spreadsheet and a printout version for your convenience, provided by the Money Saving Expert, that also allows you to be fully aware of your income and outgoings. With the excel version of this planner, tax reductions are automatically taken off of the final result. Both versions are able to show you if you’re overspending or if you have anything left over at the end of the month.
What are my weekly/monthly expenses?
Now that you’ve figured out how much income you have each month, it’s time to work out your outgoings. The first and most important things you need to consider are your essential outgoings. This is where some people get overwhelmed by the number of outgoings there can be, but rest assured it’s not as bad as it may look as a lot, if not all, of these you will already be covering naturally to keep a roof over your head. The list is as follows:
• Mortgage/rent payments
• Water bills
• Council tax
• Travel costs
• Gas and electricity bills
• Existing credit agreements
• Weekly/monthly food shop
As you can see, these are things that you have no choice but to pay every week/month just to have and run a home and to be able to get around. Make a note of each one that applies to you and how much each costs. Then add them all together – now you have your essential, monthly expenditures!
If after completing the budget planner (which we highly recommend you do), you find that you have some money left over, then that’s great! So what are you going to do with it? Any money left over is what you have to spend on optional things, whether that is buying your lunch every day, paying off any debts or buying presents for a birthday. It could even be a portion of what you’d like to save or put aside for an emergency fund. You can literally spend or save it however you like. Every month you may also need to consider whether there are any birthdays or events that you wish to attend coming up so that you have enough money in your optional allowance to cover it.
Never put anything before your essential outgoings under any circumstance!
However, if you find that you have more outgoings than income, then you may need to review your optional outgoings. Do you really need to go to the coffee shop? Are you able to walk or cycle to work, instead of driving or paying for a bus? These are things you need to consider when planning your budget, as you have no choice over your essential outgoings – these have to be paid.
Make full use of the spreadsheet or printout to see where you can make savings and get yourself out of the red. If you have several credit commitments, you may want to consider consolidating your credit into one single loan and, in turn, one monthly payment.
We here at GuarantorMyLoan might be able to help you regain control and get back on top of your finances. We offer guarantor loans, ranging from £1000 to £10,000 over a period of up to 5 years. If you have a friend or family member that would be able to stand as a guarantor, or if you just want more information, then waste no time in reading our Borrower FAQ to find out more.
If you already believe we can help you regain control of your finances, then Apply here and we’ll do our best to give you the help that you deserve.
And that’s it; that covers the basics of budgeting! All you need to remember is to make sure you have enough to cover the compulsory outgoings in your life; everything else is entirely your choice. Don’t forget to use the budget planner we provided earlier, and we hope you learned a thing or two about how to take control of your finances.
Did you find this post interesting? Check out some of our other blogs that you may find interesting here at GuarantorMyLoan:
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