If you find that you end up spending more than your income every month, so you are living in your overdraft or frequently incurring bank charges, it may be worth reassessing your spending. If you’re unsure how to do this, don’t worry – we’ve got you covered!
First things first
Before you’re able to look at your expenses in more detail, you should set about drawing up a budget. You can start this by listing all of the incomes that you have coming in, so your wages, (and your partner’s if appropriate) and any benefits, pensions or child maintenance that you receive. This will give you a good idea what you have to live off every month. After this, you can work out all your outgoings. Just make sure to be realistic when you’re doing this! Have a look at your bank statements and make a note of any Direct Debits or standing orders that you have. Factor in all your regular bills such as your mortgage or rental payments, car payments, utilities, pay TV, loan and credit card repayments, TV licence, phone bills and childcare. Then have a look at the items that you buy with cash or on your card – such as food, fuel for the car, other travel costs, meals out, takeaways, drinks and so on.
Once you’ve got a handle on where your money goes each month, you can put your spending in order of importance. This will help you to be conscious of what you should be paying off first every month.
When looking at your outgoings, go down the list and place them into two piles: ‘priority’ and ‘discretionary’. See the table below for examples of what could be included in each category:
|Priority outgoings||Discretionary outgoings|
|Rent/mortgage||Newspapers and magazines|
|Utility bills||Cigarettes or tobacco|
|Council Tax||Dry cleaning|
|Car/home/life insurance||Clothes shopping|
|Child maintenance payments||Haircuts, beauty treatments|
|TV Licence||Entertainment, day trips and nights out|
|MOT||Weekends away or holidays|
|Road tax||Monthly subscriptions|
|Food shopping||Buying lunch|
|Internet costs||Takeaways and meals out|
|Repayments on loans, credit cards and finance agreements||Presents (birthday and Christmas)|
|Pension and savings|
Your priority spends should be (just as you would think) payments that are a monthly necessity. So your mortgage or rent payments, bills, utilities, child care and food costs would all fall under this category.
Once you’ve got a thorough list of your priority outgoing add it up and subtract it from your monthly income. If the number is positive; good news, at least you have some money for discretionary spending left each month. If the number is negative you may have a more serious financial problem that is going to require some changes.
Once you have the amount that you have available for discretionary spending then you can work out how to tailor what you spend to stick within it. Even smaller purchases such as buying your lunch, picking up a magazine or packet of cigarettes can quickly add up. So see if you can reduce your spending on a few of these if you can. Don’t get us wrong, we’re not saying to get rid of all of the small luxuries that you give yourself, but just making a few simple changes can help to ease up some money from your budget. If you can make cut backs then you may be able to free up money to save.
A better way to manage money
If you’re looking for a bit more help when it comes to managing your money, our thinkmoney Personal Account could be something to consider.
The Personal Account, for which a monthly management fee of £14.50 is payable, works by having two accounts run alongside each other – the ‘Salaries’ account and the ‘Card’ account. When you get paid the Salaries account will set aside the money that you need for your bills and whatever is leftover will be put into the Card account for you to spend as you like.
If you would like to find out more, click here.