Learn how to budget effectively

Budgeting is one of the most important ways of maintaining a healthy bank balance. Learning to budget effectively can help you to ensure that you have enough money put aside for all your essential expenses each month, and this way you`ll know how much you can safely spend on other things.

How to set up a budget

The first step is to take a look at your income and your outgoings. You want to look at your actual take-home pay, so checking your bank statement is a good way to do this.

Using your bank statements, you can also get a good idea of your monthly outgoings. You`ll want to note down all your essential expenses (e.g. mortgage/rent, phone bill, utilities, essential transport & food - click here for a handy budget planner that can help you with this) as well as any non-essential regular costs (e.g. satellite TV, magazine subscriptions, and any regular activities such as meals out). You might decide that you want to cut back on some of these non-essentials, but for now it`s important that you include everything in your calculations so you know where you stand.

Add up all your essential expenses, and subtract this total from your monthly income. What`s left is your disposable income, which you can spend (or save) however you like without worrying about using up the funds you need.

What if my outgoings are higher than my income?

If you have made your calculations and you find that you are spending more than you`re earning, the situation can be quite serious. You`ll effectively be going further into debt each month, and you`ll need to take steps to reduce your outgoings to improve the situation.

Some people may find that they can do this simply by cutting back on things they don`t need (so fewer nights out, or less clothes shopping, for example). If this isn`t likely to be enough, you`ll need to speak to a debt adviser about how your situation can be improved.

A debt adviser may be able to recommend a debt solution that could improve your situation. There are a range of debt solutions available to help people in various situations, and a debt adviser can explain the pros and cons of each, as well as helping you to decide which one best suits your circumstances.