Eastbourne Citizens Advice Bureau

Financial Literacy

BUDGETING

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BUDGETING 1
budget
  • noun 1 an estimate of income and expenditure for a
set period of time. 2 the amount of money needed or
available for a purpose. 3 (Budget) an annual
statement of national revenue and expenditure put
forward by The Chancellor of the Exchequer.
  • verb (budgeted, budgeting) allow or provide for in
a budget.
  • adjective inexpensive.

BUDGETING 2
Budgeting isn’t something that only politicians do.
Understanding how to budget is the key to getting to
grips with your money and keeping control of your
finances.
Once you have set out the basics a little time each
month is all you need to keep on track.

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Basically….

minus -

equals =

BUDGETING 4
The idea of budgeting is to add up all the money you have
coming in over a set period of time. If you get paid weekly
or monthly it is best to do the calculation on that basis.

Then you work out all the expenses you will have during
that period.

You subtract the expenses from your income and see

what you have left. The remainder is your disposable
income which you can do with as you please.

Knowing the difference between essential spending and

non-essential spending helps you avoid getting into
difficulties.

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One of the tools we use to help people budget is an
income and expenditure sheet.

This can be done as a handwritten list or by using a

spreadsheet. Income and Expenditure form is available
as Excel Spreadsheet and as pdf file.

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BUDGETING 7
 We begin by completing the figures for income.

You may have different sources of income to those

listed. Everything should be added up. The key to
completing both income and expenditure is to stick to
either weekly figures or monthly throughout, whichever
you prefer.

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Then we look at expenditure, the amounts we spend regularly. The list shown
here is a guide to help you remember the main expenses. If you have other
expenses not listed remember to add them.

Feel free to add any additional expenses you think of.

BUDGETING 9
Once we have totalled up everything we subtract the
Expenditure figure from Income. This shows us how much
money we have at the end of each month, often referred to
as “disposable income”.

When we have spent money on essentials what we have left

at the end of the month is ours to do with as we please.

Hopefully this figure will be a positive amount. However

when our spending is more than the money we have coming
in this figure will show as a negative quantity.
BUDGETING 10
It may seem impossible – to spend more money than
you have coming in – but many people do it.

It means they are using money from other sources such

as drawing on their savings or borrowing from family
and friends. Or borrowing from a bank, building society
or finance company.

Borrowing money can be a safe and useful thing to do

but without a good idea of how much is coming in and
out of your pocket, you can soon get into difficulties.

Budgeting helps you avoid this.

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Lets look at an example:
Jim is 23 years old.
He has a full time job which pays him £1200 a month.
He has no other income.

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Jim rents a flat for £550 a month and that includes all bills. He
does have to pay for a TV License which costs £15 a month.

Jim estimates he spends around £200 on food and household items

and about £100 a month on clothes

He doesn’t have his own car yet and he spends £80 a month on
bus and train fares

He spends around £50 a month on his mobile phone and around

£60 a month on sky tv.

At a guess he spends about £100 a month on various things like

CDs, socialising etc.

Let’s total those figures……

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BUDGETING 14
So
£1200 income
Minus
£1155 monthly spending
leaves Jim….

£45 left at the end of each month.

BUDGETING 15
 Putting everything on paper has shown Jim that
his financial situation is OK, perhaps a bit better
than he realised. He’s not overspending and still
has something left over at the end of each month
which he could put into a saving account.

He can also see certain things which he could

reduce, such as how much he spends on clothes,
mobile phone and sky TV – all non-essential
spending.

BUDGETING 16
His spending is reduced partly because utility bills are
included in the rent. If he is thinking about moving to
another flat he would probably have to allow for more
expenses such as bills and Council Tax.
He is also thinking about buying a car which would take
the money he presently spends on travel fares. He would
have to look into how much it would cost to buy and run a
car.
If he wants to move and buy a car at the same time he
will have to budget carefully beforehand to avoid getting
into difficulties. If he sticks to the same pattern of earning
and spending he will be able to make plans for the future
with more confidence.
BUDGETING 17
This simple technique can help you keep control of your
money. Many people are surprised by how much they
spend on certain things because they have never added
them up before. This can lead to making changes and
economising.
Once you know what your disposable income is you can
make plans for the future based on a proper understanding
of what you can afford and how you can use that money.
However, there is one crucial ingredient: willpower.
Once you have worked out your budget and how you want
to use your money – you have to stick to it.
Otherwise the whole calculation starts again….
BUDGETING 18
It is important to do your calculations on the same time
period i.e. weekly or monthly.
To convert weekly figures to monthly multiply by 52 to
give the annual total and then divide by 12 to give a
monthly total.
For example:
Rent is £100 a week
£100 x 52 weeks = £5,200 a year
£5,200  12 = £433.33 a month

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To convert monthly figures to weekly multiply by 12 to
give a yearly amount and then divide by 52 to give a
weekly amount.
For example:
Rent is £500 a month
£500 x 12 = £6,000 a year
£6,000  52 = £115.38 a week

BUDGETING 20
Tips for Budgeting

Allow time to work out your income & expenditure each month

Use your bank statement to check all essential spending

Keep a record of your spending and review it once a month. Keep receipts wherever
possible

Set up standing orders and/or direct debits for rent, telephone, utilities bills and
other regular payments. This can help you budget and make sure you don’t forget to
pay bills on time.

Set aside an amount each month for savings if you can and include this in your
expenditure calculation.

Think ahead for any future expenses you can predict such as birthdays, Christmas,
start of term and plan your saving toward these dates.

Be aware of your present financial situation – how much your current balance is and
how much you owe. Avoiding the subject will only make it worse!
BUDGETING 21
If you feel you are getting into debt seek advice as soon as possible. Consult a
student welfare adviser at your college or university or visit your local Citizens
Advice Bureau. They will help you get control of your finances and help deal with
any priority debts.

Before deciding to borrow money check to make sure you are getting the best
deals. Check out any interest free offers first. Compare interest rates and aim for
the lowest APR. Don’t forget the cost of payment protection insurance if included.

If you are a student open a student or graduate bank account if you haven't already
got one.

Visit the cash point as rarely as possible. Try withdrawing money for a week and
sticking to your spending plan.

Spend carefully. Compare prices for the same items in different shops to find the
best deal. Why pay more for the same thing? Consider buying second-hand goods
if available. Visit your local charity shops for a bargain!
Find out if you are entitled to any discounts and take advantage of them.

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