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Reasons You Should Budget
and the benefits
Why should I budget?
Budgeting is the first step towards realising the full implication of you debt or financial position. It will provide you with a clear overview of your financial status at any given time and allows you to plan your future expenditure more easily
It will provide a means by which you can identify areas in which spending can be curbed and where savings can be made helping you to self manage your debt problems.
In essence, it will help you make the money you do have go further and be used more sensibly on required expenditure, in the long term helping you get out of and manage your debt.
Knowing where you money is spent can help alleviate some off the stress involved in debt management, this ensures a clearer head, clear understanding and helps you focus on turning your finances or debt position around for the good.
Set out your financial goals - these may include such things as a pensions and saving plans. Then prioritise these and try to establish how long it will take to reach these goals. Bear in mind that all your goals will not be achievable immediately, but you may need to start planning for them now.
If you feel your situation is spiralling out of control, start to buy everything on a cash basis.
When you are thinking of buying something that is non-essential ask yourself whether it is something you or your family really need or whether it is something you just want.
Preparing a Personal Budget
The simplest way to establish what your current budget level, is to utilise the budget planner found on our site. Click Here for the budget planner. Being able to see in full detail your current level of income and expenditure will help you keep control of your finances.
Keep a record of everything you spend money on to complete an accurate picture of your monthly expenditure.
Make an estimate of your annual income dividing it by 12 to get a monthly figure. Where you would normally budget for holidays, new cars include them in the first draft budget.
You also need to work out expenses that do not necessarily occur every month, such as repairs to the car, home repairs, insurance. Estimate how much you spend on these each year and then divide it by 12 to determine your monthly cost.
Once you have a total figure of income and a total figure for expenditure, take the expenditure away from the income, the remainder is your disposable income, if this is negative then your expenses are running higher than your income. If this figure is positive, this is the amount you can afford to pay towards your creditors and help you on the road to a more manageable lifestyle.
Prepare a possible budget
Now follow the same process and don't include luxury items such as new cars, holidays. By following this process you will be able to ascertain what level of disposable income you could achieve by budgeting correctly. This may mean you can pay creditors more which will make the level of debt fall at a quicker rate, or you could pay some into a savings account for a rainy day.
By combining budgeting with money saving ideas you will be able to reduce your monthly outgoings and reduce your level of debt. This is the first step of any serious debt management process.
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