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Here are seven easy steps to help you create a reliable record of how much you're spending and how much you're saving.
Between paying for groceries, buying new school uniforms and dealing with the bills that drop through the letterbox, the pounds and pennies can quickly disappear. Having a family budget will help you to keep track of where that money’s really going.
Just follow these seven easy steps to create your very own family budget planner.
1) How do my finances look right now?
Collect all your bank statements, credit card and store card statements, together as well as any other relevant paperwork. If you don’t have paper versions of all of your statements then it makes sense to print them off. You can also go into your bank’s local branch to ask for official printed copies, but there may be a charge for these.
You should have statements for at least the last three months, from all bank accounts and credit cards that you use to pay for your purchases.
2) Where is my money going?
Be clear about your regular outgoings and essential purchases. Grab at least one highlighter – you might find it easier to highlight different things in different colours – and go through the statements that you’ve collected. Highlight any essential purchases, such as shoes for your children or household utility bills.
3) What are my essential outgoings?
Once you’ve gone through your statements with a highlighter, make a separate list of all essential purchases and include the total that you’ve spent. If prices vary from month to month, go with the highest figure. If you’ve purchased essentials during a few different shopping trips, add the prices together.
If you already put money regularly into a savings fund, remember to class it as an outgoing and add it to your list.
4) How much can I earn?
Write down a list of everything that makes its way into your bank account. This will include any benefits that you receive, such as child benefit and working tax credits, along with money that you earn as wages or a salary. Remember that different benefits can come in at different times of the month and that some are paid weekly, some fortnightly and others monthly, so check your statements carefully.
If you want to know more about benefits you could be entitled to and are not yet claiming you should speak to the Citizen’s Advice Bureau or Money Advice Service.
5) How do I work out my disposable income?
You need to work out all of your income and essential outgoings and work out how much you have left each month. This is your disposable income. You could use an online budget calculator, a personal budget spreadsheet template, or an app such as OnTrees to help you do this.
6) How well am I spending my money?
If you’re left with a positive figure, you’re doing well. You can add some of that spare money to your budget as spending money, for non-essential purchases and treats.
If you’re breaking even then you’ll need to make sure that you’re very careful not to overspend. As long as you closely follow your new family budget, you won’t need to get into debt for the essentials.
If you’re spending more than you’ve got coming in then you need to take action. Look over your list of essential spending again, to see if you can trim anything back. Are you spending more than necessary on clothes? Does your essential food budget actually include the occasional takeaway? You might be able to save money by choosing a slower internet package, watching Freeview TV instead of subscription channels or moving to a new energy provider. Websites such as Money Saving Expert and the Money Advice Service are full of tips on how to shop smarter and make savings.
Separate your bills and householding spending from creditor payments, such as credit card bills and loan payments, so that you have a clear idea of your cost of living and how much debt you’re actually dealing with.
If you’re concerned that debt repayment is taking up too much of your budget, options such as debt solutions from companies like ClearStart are available to help. *
7) Should I start saving money now?
If you have any money left over, and if you’ve been realistic about how much you spend on non-essentials, then also consider adding regular savings to your budget. Even £10 saved each month will make a difference. You could also save money by switching bills.
Remember that your family budget can change over time. Why not sit down every few months, look over your budget and see what you can improve on? You could also make use of budgeting apps, such as OnTrees, which will give you an overview of all your accounts and help you track/plan your spending. Regularly reviewing the family budget will enable you to spot any changes quickly, so that you can adapt before a small change has a big impact on your bank account. It’s also wise pay off all bank card bills before starting to save, as unpaid credit and debit card bills can stack up.
*This article was provided by ClearStart. For every Individual Voluntary Arrangement that starts with ClearStart on referral from FamilyLives, ClearStart will donate £500 to FamilyLives.
ClearStart is a trading name of Clear Start Partnerships Limited.
Call ClearStart on 0800 9887601 if you need advice.