Now that you’ve dug out all of your old paperwork and established exactly who you owe money to after reading our previous article, now it’s time to take the next step to getting financially fit in 2021: Budgeting.
Making a budget is hard, sticking with that budget is even harder! But conquering debt was never going to be easy.
If you’re new to budgeting, the first step to get to grips with your finances is by working out your monthly budget plan: Take your monthly income and subtract all of your monthly outgoings, this will leave you with your “disposable income”. It’s simply the amount of money you have left over after you have paid your household bills, car costs, food expenses, as well as all your other essential amenities. If you have money left over, you can use this to pay towards your debts each month, or you could transfer it to a savings account to be used as a safety net.
If you have no money left over – or you have more going out than what is coming in – we’d suggest trying different ways to cut-back on your everyday spending.
It’s important to understand the distinction between your wants and your needs. You may want to buy the biggest TV or succumb to the latest fashion trends, but are they things that you really need? When you’re in debt, or trying to burrow your way out of it, you have to live within your means and that usually leads to sacrifices. Try to avoid purchasing the premium or branded shopping items and lean more toward the basic range. The difference in the products may only be the aesthetics, but the difference in your pocket – or your bank balance – can be much more significant.
You can even try the Latest Deals app which compares products across the biggest supermarkets in the UK.
Changing your shopping habits may only be temporary in order to overcome those difficult periods, but what about a more long-term change? Could you become a one-car family?
Now that more people work from home than ever, it can make it a lot easier to manage.
Remember: You’ll be splitting the cost of petrol, tax, insurance, maintenance, and you can use the proceeds from selling your other car to help pay towards your debts.
The good thing about a budget plan is that it can be flexible, and it doesn’t have to be set in stone for the full year. If you’ve overspent a little on your shopping one week, just cut back on one of your other variable budgets, like clothing or petrol to balance the scales.
You’re getting there – step-by-step! One of the biggest ways you can save money month to month is by switching providers; in our next article, we’ll show you just how easy this can be!