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Budgeting can be a very useful exercise in helping  individuals  take  control  and manage their money. This should be carried out on a regular basis as circumstances and situations develop and change over time.

Budgeting for the year ahead


Review your current situation

Don’t be alarmed when carrying out this task, you may even find that the simple task of noting down any debt you have can start to lift the weight, and provide that little bit more determination to sort your finances.

Detail your income and expenditure for the year ahead – budget planner

Following on from this, it can be useful to detail all of your typical income and expenditure each month. This should include all expenses from mortgage payments, car loans, food and gas through to school fees, petrol and gym memberships. It may be that your current expenses have dropped as a result of the current lockdown regulations in place and you have actually had some opportunity to save additional amounts, or perhaps more likely, you/ your partners income may have also dropped throughout this time.  Understandably, it can be hard to know when your ‘normal’ income and expenditure may resume, however you should try to be as realistic and accurate as possible. And remember you can regularly review this on an ongoing basis as situations and circumstances change.

At this stage, you should also factor in any debt that is required to be re-paid - be sure to prioritise those with high interest rates and charges etc., as well as factoring in any large milestones or plans you hope to have this year.

Producing your budget planner should then allow you to identify two main things:

1. Do I spend more than I earn? An instinctive assessment is easy – if you're eating up your savings or building up debts, you're likely to be overspending. Yet before you can address this it's important to get an accurate idea of the size and scale of the problem.

2. What can I afford to spend and save? Once you know where you're spending, you can start to alter and prioritise what you do with your money to enable you to stick within your means. This should involve factoring in repayments of any outstanding debt. You may also wish to set up regular savings with any additional income you have each month. You may also wish to make use of budget apps such as Yolt, Money dashboard and Monzo.

What should I do if I am overspending?

What should I do if I am overspending?

According to Money Saving Expert, there are a number of simple steps you may wish to go through to try to reduce the amount you're overspending.

Step 1: Cut bills without cutting back: This is about ensuring you live the same way but pay less to do so. It's pain-free as no lifestyle changes are needed. Don't just look at the obvious things like credit cards, energy bills and mortgages. You can save on things like your supermarket shopping too.

Step 2: Re-budget with what you expect to save: Once you have carried out step 1, it's worth revisiting your budget planner to incorporate your new predicted expenditure based on the expected pain-free savings. You may then find that this is enough to reduce your overspending.

Step 3 – More significant cut backs: Following this, you may find that you are required to cut back further and may have to take more significant action. You may find that you need to spend less or do less and sell things until you are living within your means.

- Start small: Cutting out your £2.50 weekday coffee could reduce your annual expenditure by more than £600. Add newspapers, magazines, cigarettes, chocolate, parking and more, and savings mount rapidly.

- Ask yourself, do I need it? If I do, could I do it more cheaply? If the past year has taught us anything, it’s to appreciate the little things. Why not consider continuing date night at home instead of going out every Friday night when you can. Or consider walking/cycling to work as opposed to spending money on public transport.

-Don't be afraid to sell things: If you're asset rich but income poor, then consider selling things you don't use or need. Of course, these sales are one-offs, but hopefully you can use the money to repay debts or get your savings back together. Consider working through your wardrobe and getting shot of old clothes, or sell any old mobile phones/ electronics that you no longer use.

-If you still find that you are in debt/ continuing to overspend, it's likely that you require more urgent guidance. Visit free non-profit debt crisis agencies like Citizens Advice BureauStepChange Debt Charity or National Debtline as soon as possible.