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How to Make a Budget and Deal with Short Term Income Changes

The current climate has meant that debt is becoming increasingly common due to short term income changes such as changes to benefits, furlough and redundancy. Whether you’re using a debt solution to get back on track or just trying to keep an eye on your finances to avoid debt — budgeting is an effective way of looking after your financial future. For most, this entails working out their household monthly income and expenses/outgoings to prevent overspending.

How To Make a Monthly Budget

Before you begin, follow these steps to prepare your monthly budget;

    1. Calculate your monthly household income. Don’t forget to include alternative income such as a pension, spousal or child maintenance and benefits. If your income has been reduced recently or is expected to be, ensure you use the lower figure.
    2. Identify your priority bills. Priority bills include rent/mortgage payments, utility bills, council tax and other payments that carry serious consequences if left unpaid. You can find out more about priority bills here.
    3. Calculate your fixed outgoings. These should include your priority bills and any other fixed monthly payments that you need to pay, such as debt repayments, mobile phone bills, TV and broadband,
    4. Calculate your non-monthly fixed outgoings. It is here where many people fall short when trying to budget. There are often payments that we make throughout the year regularly but not monthly. These can include MOT and car tax, seasonal childcare. Once calculated, divide the total by 12 and you have your monthly total.
    5. Calculate your regular monthly spending. This is the other tricky one. Often when creating a budget it can be difficult to remember all the small everyday costs. It helps to go over historical bank statements or receipts to get an average amount. Always round up to give yourself a buffer. These outgoings can include food shopping, clothing and uniform expenditure, hobbies and kids clubs, fuel etc. 

How to make a budget In Excel or Google Sheets

Making a budget in Microsoft Excel or Google Sheets is an excellent way of keeping track of your income and expenses as well as having historic, easy to view payment tracking. This enables you to be able to look at where you could be saving money or afford more. It will also flag up any inconsistencies or problems with your finances earlier. 

You can find details on how to create a personal budget in Excel here or how to create your personal budget spreadsheet on Google Sheets here. 

Best budgeting apps

If spreadsheets aren’t your thing, there are lots of apps out there for budgeting. We’ve compiled a list of the ones we think are some of the best;

  • Emma – a personal finance and budgeting tool that claims to help you save up to £600 per year! Emma not only keeps track of your finances but recommends ways to make savings and cut-backs too. It is a free app with the option of upgrading for a fee.
  • Yolt – this intelligent finance app connects to your bank accounts and lets you know where you’re spending your money and where you can save. It’ll also remind you when payments are due to leave your account or when it’s safe to spend.
  • Money Dashboard – a multi-award-winning app that allows you to see how you are spending your money giving visual representations of your budget and where you could be cutting back.
  • Wally – this long-standing budget and savings app is a firm favourite with the likes of Forbes and the BBC having recommended it. With its ‘family group’, Wally is great for budgeting a whole household. 

Budgeting Your Way through Furlough or Short Term Income Changes

With recent redundancies and furlough, many of us are living with short term reduced income. Always remember to consider this when creating your budget. Another thing to consider is ridding yourself of non-essential memberships and subscriptions, cutting down on usage of utilities where you can and budgeting your food.

Here are some top tips for cutting back on daily and monthly expenses;

    1. Batch cook. Cooking large quantities of food and freezing it in batches can really cut costs and reduce waste.
    2. Fakeaways. Instead of ordering takeaways or eating out, try creating your own Indian or Chinese ‘fakeaways’. BBC Good Food has some great recipes for budget meals and fakeaways all organised into handy collections.
    3. Cancel unused memberships and subscriptions. If you have a gym membership that you just don’t get value from or a subscription to a magazine or other publication…cancel it. You can always rejoin or sign back up when you can afford to do so.
    4.  TV & Entertainment. Do you have a subscription to a music service or TV streaming service? You would be surprised by how much you could save each month by cancelling or downgrading these subscriptions until your situation improves. There are free options for music streaming available (that may just have additional adverts) to use in the meantime. In terms of TV, most modern televisions have a smart tv function that can access free streaming and on-demand services such as BBC iPlayer and 4OD, which are also available on most phones, tablets and computers.
    5. Coffee. Many people list coffee as one of their biggest unnecessary spending habits. That coffee on the way to work or at lunch can mount up to a lot of money per month. If you spend £3 per coffee five times per week, that’s £60 per month. Invest in a good reusable coffee cup or flask and make it at home for the car journey, you’ll be surprised how much difference it can make!

If you find that even with budgeting and changing your spending habits that you’re going to struggle with meeting your monthly payments due to short term reduced income, contact your creditors immediately. Many creditors are still running payment holidays for those suffering the after-effects of financial loss caused by COVID-19. Additionally, if you speak with your creditors early enough and inform them that you have a short-term financial issue, they often agree to stop interest charges or will accept a lower payment for a set term.

It’s Never Too Late to Budget

Often it can be difficult to see the light at the end of the tunnel when you have been budgeting and keeping a close eye on your spending but your circumstances have changed and led you into debt problems. If you have already contacted your lenders and requested a payment holiday or feel that a payment holiday may not suffice, don’t worry. There are debt solutions out there that can help you get back on track and on the road to financial freedom. 

Take a look at the debt solutions section of our website for information on Debt Management Plans, Debt Relief Orders, IVAs, Bankruptcy and much more.

If you are struggling with budgeting, struggling to meet payments, worried that you are getting into debt or are being contacted by debt collection agencies — contact Debt Movement today for friendly and impartial help and guidance.

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