When you spend all day looking after other people's finances, it can be easier than you might think to overlook your own. Even when everyone around you assumes you're the expert in all matters concerning money and debt, life can sometimes present you with unforeseen or unavoidable events. Benefits of budgeting Budgeting is arguably the easiest and most effective way to manage your finances. And while it may take some effort, the benefits are numerous. It can give you control over your spending, which is useful whatever your income. You'll be able to see clearly how much money you have coming in, how much is going out and how quickly you're spending it. With effective budgeting you should no longer have to dread that end-of-the-month feeling, when you struggle to figure out why you're suddenly overdrawn at the bank. Budgeting can allow you to put some money aside for those things in life that happen unexpectedly too. It may also save you money in overdraft charges and other penalties such as late payment fees. And as your finances become more controllable, another thing you'll benefit from is peace of mind, which means less stress. How to create a budget plan Drawing up a personal budget plan helps you review your income and expenses. Start by making a list of all your incomings and outgoings. Here are some pointers to help you get started. Make a list of all the money you have coming in, including your salary, any benefits you may be claiming, contributions from other members of your household and any other income For your outgoings, list all the essential things you have to pay such as rent/mortgage, utilities, telephone/broadband, financial products (insurance), personal pension, travel costs, childcare, hire purchase/conditional sale payments, court fines, child support/maintenance and other things like food, clothing and basic household items Also include any miscellaneous costs such as paying to see your dentist or optician, private health insurance, paying for repairs around the house, subscriptions to professional associations (including trade union subs), getting your hair cut, and even things like newspapers and magazines. Try to work out an average cost for the amount you spend on as many of these things you can think of each month If you're paying off any debts, list any priority and non-priority debts that you have, including any payments you're already making towards them Getting your finances back on track Once you have a comprehensive list of all your incomings and outgoings, see how they compare. If you're spending more than you're earning, take another look at your list of miscellaneous costs - is there anything you could cut back on? Your personal budget sheet will help you see where your money is going, which means you can cut back on things that aren't essential. Once you've got a good grasp of what you're earning and what you're spending, there are lots more ways to make your money go further - here are just a few examples of the things you could do: Spend less on utilities Every penny helps when you're budgeting, so try to find out if you could spend less on things like gas and electricity by switching to cheaper energy suppliers. Check out comparison site Switcher.ie to look how much you can save. Cut down on food waste Buying food is essential, but according to figures from waste and recycling advisory body Stop Food Waste, Irish households are binning between €400 and €1,000 worth of food each year. This figure might be hard to believe, but small amounts of food waste really add up! The easiest way to reduce the amount of food you throw away is to buy only what you need, when you need it. Try planning your meals for each week in advance, make a list of everything you need and stick to it when you go shopping. Alternatively try doing your supermarket shop online - many supermarkets charge a nominal amount delivery on certain days/times, and it means you won't have to walk past things you don't need that may otherwise tempt you. Save on travel costs If you're lucky enough to be able to walk or cycle to and from work, why not leave your car at home to save buying petrol. The extra exercise you'd be doing could mean you can cancel your gym membership - which would save even more cash. If you live too far from work to walk or cycle in, try finding a car sharing scheme in your area or find out if someone at your workplace lives near you and arrange to share expenses by commuting together. Managing debt If you have debt payments to make, once you have completed your personal budget sheet, whatever's left after you subtract your outgoings from your incomings is how much you can afford to make available. It's important to tackle your priority debts first. These are the debts that could have serious consequences if they remain unpaid, such as losing your home or having your gas or electricity cut off. These include: Rent/mortgage Secured loans Council tax Utilities (gas, water, electricity) TV licence Court fines Income tax Hire purchase payments Benefits overpayments Child maintenance When you've tackled your priority debts, you can start to look at anything else you may owe, including credit card and store card bills, unsecured loans, overdrafts and business debts. Use your personal budget sheet to calculate how much can you afford to pay towards these debts each month? Try to be realistic and don't pay more than you can afford, or you may start getting into even more debt Article reproduced with the kind permission of CABA, the organisation providing lifelong support to ICAEW members, ACA students and their close family around the world.

Aug 08, 2019