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Beginner’s guide to managing your money

Taking the time to manage your money better can really pay off. Learning to budget can help you stay on top of your bills and save £1,000s each year. You might be able to use savings to pay off any debts, put them towards your pension, or spend them on your next car or holiday. 

How to set up a budget

The first step to taking control of your finances is doing a budget.

It will take a little effort, but it’s a great way to get a quick snapshot of the money you have coming in and going out.

Setting up a budget means you’re:

  • less likely to end up in debt 
  • likely to get caught out by unexpected costs
  • more likely to have a good credit rating
  • more likely to be accepted for a mortgage or loan
  • able to spot areas where you can make savings
  • in a great position to save up for a holiday, a new car, or another treat.
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What you need

To get started on your budget, you’ll need to work out how much you spend on:

  • household bills
  • living costs
  • financial products, like insurance, bank charges or interest
  • family and friends, this could include gifts, travel to events like weddings
  • travel, car costs like fuel and MOT tests as well as public transport
  • leisure, including holidays, gym fees, meals out or other entertainment.
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You can save your information and come back to it anytime you like.

You can set up a budget using a spreadsheet or just write it all down on paper.

There are also some great free budgeting apps available and your bank or building society might have an online budgeting tool that takes information directly from your transactions. 

Getting your budget back on track

If you’re spending more than you have coming in, you need to work out where you can cut back.

This might be as easy as making your lunch at home or cancelling a gym membership you don’t use.

You could also keep a spending diary and keep a note of everything you buy in a month.

Or, if you do most of your spending with a credit or debit card, look at last month’s statement and work out where your money is going.

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Get everyone involved

Get everyone in your family involved with keeping to a budget.

Sit down together and make a plan that you can all stick to.

Work out how much spending money is available and agree between you what you’ll each have.

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Cutting your household bills and your mortgage

For many of us, household bills make up a large chunk of our spending. Life is unpredictable so try to review your budget and your spending if there’s a change, or at least every couple of months.

You might get a pay rise, which means you can save more, or you might find your household bills increase.

The good news is that it’s easy to save hundreds of pounds on your bills by following our tips.

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You can also save hundreds and even thousands of pounds by shopping around for a new mortgage, or reviewing the one you already have.

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Paying off loans and credit cards

If you have loans or owe money on credit cards it usually makes sense to pay off the debt that charges the highest rate of interest first. Examples include:

  • credit cards
  • store cards, which normally charge the highest rates of interest
  • personal loans from the bank, which normally charge a lower rate of interest than credit or store cards.

It is important to make sure you don’t break the terms of your agreements.

So even if you’re focusing on paying down another debt, you must cover at least the minimum payment on any credit cards and your monthly required payments on loan agreements.

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Getting help if debt problems become serious

If you’ve already missed credit card or loan payments or if you’re behind with so-called ‘priority debts’ such as your:

  • rent
  • mortgage
  • court fines
  • energy bills
  • Council Tax
  • Child support.

take advice from a free debt advice charity straight away.

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Set a savings goal

It might be hard to think about setting aside any money as savings, but at the very least it’s a good idea to try and have some emergency savings.

Emergency savings is money to fall back on if you have an emergency, such as a boiler breakdown or if you can’t work for a while.

You want to be able to pay for an unexpected repair, but it’s also important to have enough money for a few months in a sticky situation.

Say you lost your job or split up with your partner, and needed some time to get back on your feet – you’ll want a bit more than the cost of a new boiler or washing machine.

Don’t worry if you can’t save this straight away but keep it as a target to aim for.

The best way to save money is to pay some money into a savings account every month.

Once you’ve set aside your emergency fund, possible savings goals to consider might include:

  • buying a car without taking out a loan
  • taking a holiday without having to worry about the bills when you get back
  • having some extra money to draw on while you’re on maternity or paternity leave.
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Investing your savings

As your savings start to grow, you can:

  • put more money into your pension; it’s a great way to make sure you’ll be able to live more comfortably later in life
  • make an investment plan based on your goals and timeframes.

If you’re overwhelmed by your debts

Often, the hardest part of paying off your debts is taking the first step. 

It’s easy to feel overwhelmed if you know you’re struggling financially.

It’s tempting to bury your head in the sand and ignore your bank statements and demands for payment, but it won’t make the problem any better and could make it worse.

So, take a deep breath and open any letters you’ve been ignoring.

Once you’ve done this, at least you’ll know what you have to deal with and you can work out what you need to do next.

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
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