Budgeting and debt
Budgeting can improve almost anyone's finances, but if you have debts to manage then it could be especially important. With good financial planning, you could find it much easier to stay on top of all your payments. Without, you could easily find yourself overspending, and that could cause problems further down the line.
How to budget properly
Organising your own budget is simple, yet it could make a huge difference to your finances.
Start by noting down all your regular monthly costs. To make sure you've included everything, it's worth looking at a few recent bank statements. This list should include things like debt repayments, mortgage/rent, energy bills, Council Tax, food, and so on. Now add up these costs.
Next, look at your take-home pay (you'll have to do this every month if your earnings change frequently) and subtract your total monthly outgoings. The remaining money can be used for whatever you like - whether that's spending, saving or overpaying your debts.
To be extra safe, it might be worth putting the money for essential outgoings into a separate account (e.g. an instant-access savings account) at the start of each month, to make sure you don't accidentally spend it. When each bill leaves your account, move the relevant amount back into your main account.
Savings: a key to financial security
Also important is a good savings account. If you have a good amount of money put aside in savings, financial emergencies should be much easier to deal with - and most importantly, you're less likely to get further into debt. Experts often recommend keeping the equivalent of three months' salary in a savings account, but any amount will help more than none at all.
Having said that, it's often a good idea to use any 'spare' money to pay off your debts more quickly, if possible.
What if I'm spending more than I earn?
Sometimes, people only realise they're overspending when they take a proper look at their finances. If your budget plan shows that your outgoings are higher than your earnings, then you're potentially in a very serious situation, and you should take action immediately.
In some cases, you might find that a few simple cutbacks can help solve the problem. For example, cancelling that unwanted gym membership or unnecessary TV subscription could make more room for your debt repayments and other expenses. But if cutting back on non-essentials isn't going to be enough to solve the problem, you should talk to an expert debt adviser about the various debt solutions on offer.
Think Money offers a range of debt solutions, such as debt management plans and IVAs (Individual Voluntary Arrangements), as well as other financial solutions.
There are a number of debt solutions that can help with various personal circumstances and different levels of debt. It can be hard to decide which is right for you, but a debt adviser can point you in the right direction.
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