When you’re dealing with personal debt, it is often difficult to know where to begin as it seems like your finances are very complicated and hard to understand. This is the reason why working out your personal budget is usually one of the very first steps to take in this situation. Put simply, your personal budget is an easy to understand report showing you exactly what is coming in and going out. This lets you know exactly what you have left over at the end of each month.
It is this bottom line figure that shows you how much money you have left over to pay your debts. Here is how you work out a simple personal budget:
- Firstly you calculate your total income each month. Write down all of the money you have coming in, such as salary, any benefits you receive or pensions, and any other forms of income. Because you are looking to work out your monthly budget, if you are paid weekly you will need to multiply this figure by 52 and then divide by 12. This will give you your monthly salary.
- Now it’s time to calculate everything you have going out each month. This needs to include all of your bills such as utilities, council tax, road tax etc. Again, some things will need to be calculated as a monthly figure – if you have bought 12 months’ road tax for example, divide the cost of the tax disc by 12. Don’t forget to include one-off expenses such as Christmas; if you have a good idea of what this costs you each year, again, divide by 12 and add to your monthly outgoings. If you’re not sure how much you spend on food each month for example, write down how much you spend in a week, multiply by 52 and divide by 12.
- To get your bottom line, take your total expenditure away from your total income. For example, if your income is £1500 per month and your expenditure is £1400, your bottom line is +£100. This is the money you have left over each month to pay your debts. If you have a negative figure left over, this means you are spending more than you have coming in, and you’ll need to manage your money more wisely.
Money management simply means being in control of your finances and making a conscious effort to reduce your outgoings, and increase your income if possible. Once you have made your budget you will know how much you are spending on certain things each month. This is where shopping around can help. Many expenses such as gas, electricity, mobile phone contract or landline telephone, and Internet connection can be reduced, simply by spending time looking at the alternatives. Shop around and get the cheapest deals possible.
Also, make sure you fully investigate whether or not you are able to receive additional benefits. Contact your local council and find information on the government website to find out about this.
If you’d like more information about anything in this article, contact us today to see how we can help. Not only can we help you budget, but we can also help you solve your debt problems in many different ways.