Top tips on budgeting
As a result of Covid-19, some one in seven (14%) of people have fallen behind on essential bills – including energy, water, mobile phone and broadband bills, council tax, rent or mortgage payments – the equivalent of seven million people in the UK, according to research from Citizens Advice.
Westminster Citizen’s Advice volunteer adviser Matthew Taylor explains:
“We are here to help the many people facing difficult financial decisions at this time with tips on how to manage their money better. The goal of personal budgeting is to pay all bills on time and in full. However, not all bills are the same and income has to be managed to make the most of it. Now is the time for people to review their financial position and the tips below provide a useful checklist.”
1 Know your income
The first step to managing household bills is to know your income from whatever source – earnings, benefits or pension.
2 Know your expenses
Next, make a list of all your expenses to see how your money is being spent. It might be quite a long list and it may help to group similar expenses together. Bank statements and receipts may be a handy memory jogger.
At first, it’s a good idea to keep a record of all expenses. This way, you can see patterns of expense, know how much is being spent and identify the largest items.
By keeping a record of what you spend, you can check that your planned spending is realistic.
Budgeting only works by checking actual spending against planned spending. One thing is certain. Actual spending will be different from planned spending. It’s a good idea to ask yourself what you would do differently next time. Try to adapt your spending to meet your limits. The crucial thing is to have a plan, and to keep as close to it as you can. Put simply, a plan is better than no plan.
It’s best to work out income and expenses for a similar period of time, such as weekly or monthly. It doesn’t matter whether weekly or monthly – use whichever period suits you more.
3 Draw up a budget
A sample budget might looks like this:
|Job and/or benefits||Annual||15000||1250|
|Accommodation: rent, council tax||Monthly||500||500|
|Entertainment and other||Weekly||50||217|
There are plenty of budgeting tools available on line, such as Money Advice Service and Money Saving Expert. These and other websites also have tips on budgeting. Budget planners can be helpful. They allow you to enter what you spend and how much you earn, and can give a breakdown of your finances. Some people find budgeting apps useful. Free apps include Wally, Spendee or Toshl Finance.
4 Pay your priority bills
Not all bills are equal. From a legal point of view, it’s more important to pay some than others. These are known as priority bills because serious consequences may follow if they are not paid. Priority bills include council tax, electricity and gas bills, rent or mortgage payments, court fines, maintenance for others, including child support, and TV licence.
The table below shows the possible consequences of non-payment.
|Priority Debt||Possible ultimate consequence of non-payment|
|Council tax||Money could be taken from income/benefits; bailiffs; prison|
|Electricity and gas||Supply could be cut off|
|Rent or mortgage||You could lose your home|
|Fines from magistrates court||Could be prison|
|Secured loan (second mortgage)||You could lose your home|
|Maintenance for others, including child support||Fine; money could be taken from income/benefits; bailiffs; prison|
|TV license||Fine; money could be taken from income/benefits; bailiffs; prison if fine not paid|
5 Timetable your bills
Make a note of when these bills fall due and allocate an appropriate amount so that it’s available when needed.
Then set a limit for all remaining spending so that it does not exceed monthly income. Make a list, like the sample budget above, of how much you expect to spend. It’s wise too to include a small sum for savings, so that there is a reserve in the event of an unexpected expense. See if any of the expenses can be reduced, delayed or stopped.
A good place to start is with gas and electricity bills. As one of the largest bills, even a small percentage saving may represent quite a big sum. All gas and electricity bills tell you if you’re on the cheapest available tariff. They all give the name of the cheapest equivalent tariff. If you’re not on the cheapest tariff, a simple phone call to ask to be put on a cheaper tariff will start saving money immediately.
6 Check eligibility for income support or bill reductions
If you’re on a low income or receive universal credit, you could be eligible for reduced council tax, called council tax reduction or council tax support. Reductions depend on the rules of each council, your income and circumstances and if you live with other adults or children. Living by yourself also entitles you to a reduction.
Other resources include:
Citizens Advice for information on benefits, debt, housing and more www.westminstercab.org.uk
Money Advice Service for information on a wide range of topics including debt, borrowing, budgeting and managing money, bank accounts and saving Www.moneyadviceservice.org.uk/en
Money Saving Expert is a journalistic website providing money saving guides, tips, tools and techniqueswww.moneysavingexpert.com
National Debt Line provides lots of helpful information, tools and advice about budgeting and debt. Webchat and phone lines available. Tel no is 0808 808 4000
You will find a benefits calculator and a list of grants available on Turn2us www.turn2us.org.uk