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Money Advice

How to budget and stay on top of your family finances

However much money you have right now, a budget can make it go further! A money plan can even leave you better off and less stressed – and you don’t need to be a maths wiz to make one.

At its simplest, a budget is just a record of how much money you have coming in and going out. What makes them brilliant is that even a basic budget can help you and your family:

  • make the most of the money you’ve got;
  • be better off in the future;
  • cope with unexpected costs;
  • feel more confident about managing your cash.

Budgeting works for everyone. It doesn’t matter if you’re feeling flush, struggling to get by, or just don’t know how to take control of your finances. A money plan can help you move forward.

What can I use to make my budget?

Use whatever you feel comfortable with. Go old-school with a piece of paper and a calculator. Or use your computer’s spreadsheet programme or a budgeting app. The Money Advice Service also has a detailed online budget planner which can do all the sums for you.

How do I make a budget?

The best place to start is with a deep look at your finances. It’s fine to estimate figures but it’s best to be as detailed as possible. If you can, dig out receipts, bank statements, bills and payslips. Either way, make a list of:

A. Your total monthly income

This might include:

  • wages;
  • benefits;
  • child maintenance;
  • maternity or sick pay;
  • money from savings/ pension;
  • anything else that gives you regular income.

If you get any paid as lump sums, it’s worth splitting these into their monthly equivalents, too.

B. Your total monthly outgoings

Essential spending

These are your fixed or priority payments. They’re often paid by standing order or direct debit. Missing them can mean expensive or stressful penalties. Your essential costs might include:

  • rent or mortgage;
  • insurance;
  • utility bills;
  • repayments towards a loan or credit card.

Flexible spending

These are payments that can fit around your circumstances from month to month. This category might be groceries, clothing, regular home maintenance, childcare. Don’t forget to include entertainment or eating out, gym memberships and magazine subscriptions.

Whether something is as ‘essential’ or ‘flexible’ is down to you and your family. Either way, aim to be extremely honest and write down all your spending!

Putting your budget to work

Once you’ve listed everything you can think of, take a moment to add up your monthly income and outgoings.

Ideally, you’d have enough money each month to cover your spending, with a little left for treats or emergencies. In reality, most of us don’t have quite enough, or we cut it very close! If that rings true for you, it’s worth asking two questions before borrowing to get by:

Could you increase your income?

  • Are there benefits or financial support you’re entitled to but aren’t claiming? The turn2us website has a benefits checker and grants tool that can help you find funds.
  • Could you or your partner get extra shifts or negotiate a better wage?
  • For example, do you have a spare room you could let? Could you sell things you don’t need, have won or have made? What about completing jobs, tasks or surveys online?

Where can you spend less?

  • If you’re spending money on things you can live without, cut them out entirely or find free alternatives. Your budget can help you identify unnecessary money suckers!
  • Get in the habit of comparing prices on everything! That includes mortgage deals or rent to groceries and bills. Try to get a better deal each time. Save on family activities with voucher codes, discounts and offers, especially online.

How can I use a budget to stay on track?

A good rule of thumb is to divide out your income. Your essential and most important costs are a priority: put the money aside or pay those bills first. Whatever’s left will have to last you for the rest of the month – so it means being organised!

After paying essential costs, split your spending money into weekly amounts. It’s easier to manage smaller amounts, plus you’ll be more aware when it’s running low.

Use a notebook to log your daily spending. Keeping a running total can help you stick to your allowance. It also makes it easier to spot patterns, such as emotional spending, or opportunities to save. For example, you could take your own snacks on outings, instead of buying them.

Can a budget help me cope with emergencies?

A budget can help you stay on top of the money you have – but think of it as a useful tool, not a magic pot! There will always be times when unemployment, emergencies or broken boilers land out of the blue. The key is to use your budget to protect yourself as much as possible.

One way is to save money each month towards big bills, planned purchases or unexpected costs. Put aside at least £10 every month for Christmas, for example. That way, you won’t have to scramble to find lots of cash at once in December. The same is true for holiday funds, emergency repairs, a new car, or even treats.

If the worst happens, your budget can also help you spot where you can adjust your spending to find extra cash. It all helps you get back on your feet faster.

How can a budget make my family better off?

Budgeting can help you avoid unnecessary spending and manage your financial commitments. It’s also a great way for children to start learning money skills at home.

What about the bigger picture? You might want to support your children when they go to university. Ot you might have a dream of starting your own business or buying a bigger home. Wherever you want to be a year or two from now, your budget can help you. It lets you dentify how much money you can spare each month or how much extra you need to get there.

It’s worth picking one or two money goals and making them part of your monthly essential spending. This can be for treats, emergencies or investments. Saving up often works out cheaper than buying on credit. That way, more of your money goes towards the things you really want. It takes patience, but squirrelling a bit away every month is the simplest way to build a nest egg. And having funds of your own gives you more freedom to spend it how you like.

How often should I update my budget?

The more often you keep an eye on your money, the more say you have about where it goes! The ideal is updating your budget once a month and keeping daily tabs on your spending. Ultimately, stick with whatever works for you.

Trusted resource

The Money Advice Service was set up by the government. It offers free and impartial guidance on a range of topics, including work, benefits, disability and retirement.

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