If you’re looking to make some real headway on your finances this year, it’s best to start at the start – and make sure you understand exactly where you stand today.
Are you worried about money?
Last year, almost 110,000 people in England and Wales entered insolvency. Believe it or not, that’s actually a 9% drop on the previous year – and it’s a full 19% lower than 2010’s figure (over 135,000).
If you’re worried about the possibility of joining them, don’t just worry about it. What counts is doing something about it – and the best place to start is by drawing up a budget.
As it’s such as useful tool, it’s a shame everyone doesn’t have a budget of their very own. Three of the many reasons to budget:
* A good budget shows you where you stand financially.
* It can warn you if your personal finances are worse than you thought.
* It can help you figure out the best ways of cutting back on spending.
Know where you stand
How much money comes into your household each month? How much goes out? If you’re the kind of mum who handles the family finances, you can probably give rough figures already, even if you’ve never sat down to work it out exactly.
A good budget, of course, is all about being exact. Check out MoneySavingExpert’s online budget tool for a good example of how it all works.
Find out if your finances are worse than you thought
If you’re worried about the thought of bankruptcy, remember it’s a last resort, there to help people who can’t repay the money they owe. There might be a number of ways you could deal with your debt problems before they reach the stage where declaring yourself bankrupt is the only realistic option.
It depends on your situation – and on how early you ‘catch’ your problems. So that’s another solid reason to get your budget up and running: it can warn you if your debt problems are getting worse. You can visit the Debt Advisory Centre website for information on the debt solutions that could help you get your debts back under control.
Figure out where you can cut back
Budgets don’t just deliver bad news. You might find out you’re on top of everything: clearing your debts, paying the bills on time, slowly building up your savings…
Or it might reveal that you’re doing OK – but sailing a bit close to the wind. Even if you can afford all your costs, what would happen if your mortgage costs rose, your income went down, or your gas bills went up?
The bigger the difference between your earning and your spending, the more ‘spare’ cash you’ll have, so the safer you’ll be the next time life throws something unexpected your way. Again, your budget can help. It can show you exactly where you’re spending too much – and help you figure out ways to cut back.
If your weekly shop’s costing too much, have you considered budget supermarkets like Aldi, or voucher sites like MyVoucherCodes? If your utility bills are sky high, try a service like uSwitch. If you’re worried about your car insurance costs, have you tried a comparison site?
These are just a few ideas: different people will learn different things from their budget. The sooner you get yours worked out, the sooner you’ll find out what it can teach you about improving your finances.
Brought to you by the Debt Advisory Centre