Setting up a budget to control debts

Calculate the money coming in to start the budget to control debts

Your income is the first thing you need to work out when you set up a budget. Your income will probably come from various different sources such as:

  • Wages or salary
  • Pensions
  • Benefits
  • Rent from a lodger
  • Maintenance payments made to you
  • Other sources not mentioned here

Calculate money going out (expenditure)

Now work out how much money you are spending each month. This is called your expenditure and examples could include the following:

  • Mortgage or rent
  • Council tax
  • Telephones
  • Utilities bills such as electricity, water, gas
  • Television
  • Food
  • Insurance
  • Entertainment
  • Transport
  • Childcare
  • Maintenance payments
  • Paying back debts

If you are paid monthly that is called a salary and if you are paid each week that is referred to as wages. Most people calculate their expenditure on a monthly basis since salaries are paid monthly and most of us pay for the big expenses such as mortgage or rent once a month. If you calculate your expenditures on a monthly basis remember to factor in the expenses that are not paid each month, for example:

  • Car tax
  • Gas and electricity
  • Water rates

A spending diary

Your budget will not work if you do not have a realistic idea of how much you spend. It is, admittedly, difficult to keep track of what is spent because we spend money here there and everywhere. It is difficult to keep track of the small things such as snacks, gifts, newspapers and so on. A spending diary can help enormously to keep track of everything you spend. This will give a clear and realistic picture of the situation. It is always better to know the bad news so that you can deal with it. Every time you spend money jot it down in the spending diary. This is not a project you have to do for the rest of your life! Just do it until you have an idea of what you are spending.

When you have a good idea of how much money is coming in and how much is going out you can get down to making your budget. A simple pencil and piece of payer will suffice!

Write in one column how much is coming in and another column how much is going out. You then minus your expenditure from your income and you will see what remains. If you are spending more than you are receiving you will have to see where you can cut back and save. Once again, you will not have to do this for ever, just until you have managed your debts and your income once again exceeds your expenditure.

Happy budgeting!

For more help with debts contact: Turn2us Charity