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Income and Expenditure
Budgeting is a good way to take control of your money, making sure you have enough for the things you have to pay for and the things you want to pay for!
Many people use a budget to help them save up for something, pay off any debts or simply to make sure they can pay their bills each month.
To create a budget, you need to look at your income (the money you have coming in) and your outgoings (what you have to pay for). Examples to include in your budget can be found below.
You can set a budget up using a spreadsheet on your computer or just write it all down on a piece of paper. Create a table showing your monthly income and your monthly outgoings and the difference between the two. To stay out of debt, your chart should show your income as being more than your outgoings.
Your bank or building society may also give you access to an online budgeting tool which takes information directly from your transactions. Alternatively, use the Money Advice Service’s really helpful online Budget Planner.
You might get your income from:
- A part-time or full-time job
- Pocket money from relatives or guardians
- Benefits you are entitled to
- Odd jobs for parents or neighbours that you are paid for
- A student loan or grant
- A personal loan
- Any training grants
Task: Write down a list of all your sources of income, working out how much you get per week, month or year.
Outgoings: The second step is to find out how much of the money you are earning is going out each week or month.
Warning #1: It is easy to overlook certain routine outgoings, such as transport costs, underestimate how much things cost, like your food bill, or simply forget about certain costs, like buying your sister a birthday present!
Top Tip #1: Try and keep receipts for all your expenses for a few months to give you a better picture of what you are actually spending, not what you think you are spending. Call it a ‘spending diary’, if you want.
The following are just some categories and examples that may help you think of what you spend:
- Tax: Income tax, council tax, national insurance
- Household bills: Rent or mortgage payments, energy, water, landline telephone, mobile phone, satellite TV, internet
- Other “essentials”: Clothes, food, make-up and hygiene products, haircuts, dental procedures
- Educational costs: College or university fees, books, stationary or equipment for your course, fieldtrips
- Travel: Car MOT or servicing expenses, petrol, train or bus fares or passes, holidays
- Leisure: Meals out, cinema, clubbing, magazines, sweets, membership fees, even cigarettes
- Family and friends: Birthday and Christmas presents
- Other: Insurance of all types, loan repayments (including student loans), credit or store card bills, pension contributions (yes, seriously!), shares, bonds
Warning & Tip #2: It can be difficult to estimate how much you spend but don’t try and fool yourself or your budget won't work! Be realistic and you’ll have enough money for the things you need and want.
Tip #3: Create your list of all your out-goings by month. If there are outgoings that don't happen each month, like a haircut or Christmas, try and spread the cost of these over the whole year so a small amount will appear for them each month instead.
Spending more than you earn?
To stay out of debt, your income needs to be more than your outgoings.
If your budget chart shows you are spending more than you earn, you either need to look at ways of reducing your outgoings or increasing your income.
For example, if you want to increase your income, you could consider getting more hours at work or a second job or selling items to raise some cash.
If you want to cut back on your outgoings, there are lots of ways you can save money, including:
- Saving energy – you can cut back on your energy bills, like electricity and gas, by only using them when you need to. Small things like turning off a light when you leave a room and turning off the tap when you are brushing your teeth can save a lot of money in the long-term
- Change your shopping habits – try shopping at a cheaper store or buying the store's own-brands to save money. If you find yourself buying a lot of ready meals, try cooking from scratch instead which is much cheaper (and healthier!)
- Make the most of discounts – if you are a student, try going to bars that have student nights or shops that offer a student discount instead
- Change your phone – a 'pay as you go' phone will make sure you don't get up spending more than you can afford
- Budget for presents – set aside a certain amount for birthday or Christmas presents per person and stick to it
- Cancel subscriptions or Direct Debits that you no longer want or need
- Use price comparison websites - there's one basic rule - whatever it is you're looking for, there's likely a site to help you find the cheapest price. They can help you compare dozens of prices in minutes
No excuses! There are plenty of ways to save money so sit down and spend some time thinking on how you can cut back on your outgoings and be strict with yourself!
If you are worried about getting into debt, please see the Debt section for information and advice. There is no need to panic– help is there for you but you should take action as soon as you can