Leugh an artaigil seo sa Ghàidhlig.
Budgeting is essential if you want to manage your money well. It may seem daunting at first, but it could save you thousands and help to add structure to your life.
1. What's coming in
To find out what sort of budget you will need, you must find out your money coming in and going out. A good idea is to make a budget depending on your monthly spending and income.
It’s easy enough to find how much money is coming in. This will be in the form of a payslip, self-employment earnings, investment income, benefits you receive or a Universal Credit payment. You may have to work out taxes on your income if it has not been done automatically. Your bank account will also show you payments that are coming in regularly.
2. What you're spending
Finding out how much money you spend is a bit trickier. First, you should find out what all of the monthly expenses are that you know of, such as rent, mortgage and loan payments, bills, council tax, phone contracts, insurance and any other recurring payments. Once you have found out all of your recurring payments add them up and figure out how much this costs each month.
Figuring out other payments such as food and travel is a bit trickier - remember you don't need to know the exact amount but an estimate to get started with. To calculate monthly shop spending for essentials such as food, you may want to keep a hold of your receipts and add the total at the end of the month. If you do this across a few months and find the average you will get a more accurate monthly spend.
Once you've figured out how much is coming in and going out each month, you can use the Money Advice Service's budget planner tool to break down your spending and get tips on how to better manage your budget.
Once you've figured out your monthly expenses it then comes to comparing it with your monthly income. If your income is greater than your expenses then you're in profit! You can save, invest, pay off debts or spend this money.
If however, your expenses are greater than your income, then you are losing money. You might have to consider cutbacks on your spending or increase your income.
4. Cutting back on non-essentials
To reduce spending, you might have to be more thrifty. Compare prices for essentials such as groceries and make sure you're getting the best deal - can you get the same for less somewhere else?
Treating ourselves is nice from time to time - but realistically if it's something you can't afford to do every month, have a think about when the right time is to buy non-essential items. Could you save up towards something over time instead?
As we get older and become more independent financially, it's important to try to have an emergency fund saved - just in case.
Putting a small amount away for emergencies can help a lot - you never know when you might be cut short in employment, rent or even an unexpected vet bill. Otherwise you might have to take out a loan and make repayments with interest.
Once you’re making money it's good to have something to save for! Whether it's something short-term like an outing at the weekend or something more long term such as a nice holiday it's nice to have a goal. This will give you more incentive to save and get you into a good habit of looking after your money!
It's a good idea to try and save money for big purchases rather than take out a loan to buy them or pay in instalments which will cost more in the long run.
When purchasing substantial things, have a think about why you want to buy it.
The first thing to ask yourself is 'will this last for a long time or need replaced regularly?'. Sometimes it’s better to buy a quality item that will last longer than spending lots of money constantly replacing it. Another tip when buying is to try your best to buy things which will hold their value. This is a good idea since you can sell when you no longer need the item or for financial reasons. When it comes to clothes for example - a pair of shoes might be less expensive but wear out faster, whereas for a bit more money you might get a pair that last you three times as long!
Having a budget can help with planning for the future. If you have a good plan and pay off your debts then after time you will have more money to spend each month. This is a far better choice than to constantly gaining new debt to pay for an unsustainable lifestyle.
If you are facing financial difficulties you may be eligible for support from the government. If you are out of work, on a low income or having difficulties paying rent or mortgages then you may be eligible for Universal Credit.
Get more information about money management at Money & Me.