Making a budget plan
Knowing how much money you have coming in and going out allows you to:
- avoid a bad debt situation,
- have a sense of what you can and cannot afford,
- plan for your future aims in a realistic way.
You may want to have a go at drawing up a budget for yourself.There are three steps in drawing up a budget plan:
- work out your present money situation
- look forward to see what your future needs and goals are
- decide on what actions you are now going to take
What's my present money situation?
Draw up a chart of all your money coming in and your payments out.
Charts may be prepared for different time-scales – weekly, monthly or yearly (annually). Choose one that suits you best. If you are working or on a training scheme, you may find a monthly or weekly one works best, depending on how frequently you are paid.
If you are a student, an annual one may be easiest, to take account of your grant and student loan.
How much is my income?
First, write down all your money coming in. This will include:
- wages, or training grant
- student grant and loan (if you are a student)
- any state or other benefits which you receive
- money which you get from your parents or other people.
How much am I spending?
Second, write down all your payments out. These should include everything that you spend.
List all the things that you have to spend money on – your "non-discretionary expenditure" – such as your travel to and from work or college, your food, any rent or college fees, mobile phone, or car costs. Remember to include ALL costs; for example, 'a car' will include petrol, insurance, vehicle tax, MOT and servicing. If you have taken out a loan, or are repaying credit, remember to include the amount of your repayments as well as the interest you are paying.
Then list what you estimate you spend on non-essentials – your "discretionary expenditure" – such as your entertainment and other socialising, eating out, holidays, clothing, sporting activities etc. (see below for an example check list).
Be honest and realistic! If you under-estimate what you are spending, your financial position will look rosier than it is.
When you have listed all your income and spending, add them all up and compare the totals. If your income exceeds your spending, then you have the opportunity to save some money. If your spending exceeds your income you will be running into debt, which means you need to work out how you're going to manage it (see 'Debt control').
Drawing up your budgeting chart
Here is the sort of budgeting chart that you could draw up. Adjust it to suit your circumstances.
Drawing up your budgeting chart
Here is the sort of budgeting chart that you could draw up. Adjust it to suit your circumstances.
| Income | |
|---|---|
| Income from work | ¾ |
| Benefit payments | |
| Student grant | |
| Student Loan | |
| Other | |
| Total weekly/monthly/annual income | |
| Expenditure | |||
|---|---|---|---|
| Public transport | Tobacco | ||
| Food | Newspapers and magazines | ||
| Rent or mortgage | Videos/books | ||
| College fees | Entertainment (pub, sports, cinema, clubs) |
||
| Gas | Car tax | ||
| Water | Car insurance | ||
| Electricity | Car servicing (MOT) | ||
| Council Tax | Holidays | ||
| TV licence | Presents (Christmas, birthdays) |
||
| TV rental | Trips out | ||
| Insurance of property | Meals out | ||
| Insurance of contents | Standing orders and direct debits | ||
| Launderette | Repayment of loans | ||
| Telephone rental | Hire Purchase payments | ||
| Telephone call charges | Other | ||
| Clothes | |||
| Total weekly/monthly/annual expenditure | |||
| Balance
(the difference between total income and total expenditure) |
Next, make a note of all the money you have borrowed and will have to re-pay. This may include:
| Outstanding debts | |
| Credit cards | |
| Bank loans | |
| Student loans | |
| Other loans or unpaid bills |
You should now be able to judge whether you are currently living within your means, or whether you are building up debts. And you will have a picture of how much you already owe to other people and organisations.
