Cost of living

Guest article by StepChange

We know most people want to manage their money in the best way possible. However, the idea of putting a budget together can stir up feelings of anxiety and discomfort – where are you even supposed to start?

To be truly money-savvy, you need a thorough understanding of your income and outgoings, and a budget is the best way to achieve this.

Creating a budget is the first step towards taking control of your finances and getting a clear idea of your situation. It helps you to see where your money is going, so it’s easier to make sure you’ve covered all the things you need to pay for.

As the UK’s leading debt advice provider, StepChange has helped millions of people take back control of their finances throughout their 30-year history.

Dawn Cattrell, trusted StepChange Debt Advisor and a Wrexham local, shares some advice on how to approach the budgeting beast with confidence.

Dawn’s budgeting top tips

Dawn Cattrell, trusted StepChange Debt Advisor and a Wrexham local

“I’d like to share an instant pro tip that anyone can get started with! As our food shopping continues increasing in cost, I recommend sitting down and making a list of meals that everyone likes and planning your shopping around the necessary ingredients.

“If you have kids, involve them too! It’s great to get them involved and to share the process of making financial decisions.

“Most importantly, make that list and stick to it. This will ensure you have the meals you need and that you’ll keep everyone (relatively) happy.

“Also, never go shopping when you’re hungry – we’re only human, and it will usually lead to buying additional things we don’t need. Now, when it comes to creating a full budget, this is what you’ll need to do…” 👇👇👇

1. Work out your total income

“There are many reasons why you can view budgeting as difficult. Not knowing what your most important bills are, not having a realistic budget. Feeling like you’re being punished by cutting down on stuff you love or not having a big financial goal to work towards.

“That’s where places like StepChange come into play, to give you that assistance.

“When it comes to creating a budget, the first thing you’ll need to do is add together all the income you get each month.

“Make sure you include everything, whether it’s your wages, benefits, or pensions. If some of your income is paid weekly or 4-weekly, you’ll need to turn these figures into calendar monthly ones.

“To do this, multiply the weekly figure by 52 and then divide this by 12. This will then give you a calendar monthly figure to include in your budget.”

Help with the cost of living – claim what’s yours, reduce your bills, look after your health.

2. Make a list of everything you spend each month

“Start with your most important bills. Your mortgage, rent, council tax and utilities like gas, electricity, and water. These are classed as priorities because they have the most severe consequences if your payment is late or if you miss a payment.

“Next, write down what you usually spend on living costs such as food, clothing, and toiletries. Using old shopping receipts can help you work out what you typically spend on these items each month.

“Don’t forget to include amounts for things you only pay for once a year or less often, such as Christmas, car repairs, or vet bills.

“To do this, divide the yearly cost by 12 to give you a monthly figure you can include in your budget. You can then set this money aside until the bill is due.”

3. Deduct the total amount you spend each month from your monthly income

“If you’ve got any money left over after you’ve paid for everything then you have a ‘budget surplus’.

“If you’re spending more money than you’ve got coming in, you have a ‘budget deficit’.

“Once you’ve established your financial position, you can see where there might be a problem. For example, are you paying out too much in bank charges, or maybe in debt repayments?

“Creating a budget doesn’t have to be complicated, and there are a lot of free apps and websites out there that will help make it much easier for you.

“Sometimes it’s a case of taking a few straightforward steps to improve your financial position, like cancelling unwanted subscriptions or checking for a better value phone contract.

“Sometimes, the problem will be bigger, and there might not be any quick fixes for your situation. This could be a sign that you’d benefit from free debt help.

“An advisor will help you understand your finances before they recommend a way of dealing with your money worries, so you don’t have to deal with it alone.”

Accessing the free debt help available

Whether you’re worried about missing important payments or simply want a clearer picture of your finances, there are loads of benefits to making a budget.

For example, if you’re struggling to make payments then you might be able to agree on more affordable payments with your creditors. Share your budget with your creditors when you ask them for a temporary payment arrangement or a payment holiday.

If you get free, confidential debt advice, you can also check if you’re eligible for Breathing Space. Launched in 2021, this government scheme (available in England and Wales) helps relieve some of the pressure and stress caused by being in debt by stopping creditors contacting you about your debts for 60 days.

StepChange’s expert team of debt advisors can help you put together your application over the phone, or you can do this yourself online.

When it comes to the cost of living, making sure you claim all the help and support you’re entitled to could make a huge difference.