Budgeting on a low income

Having a budget is a really great way of managing your finances and get the most out of your income. It is important to review your budget regularly to keep an eye on your expenditure vs your income.

Most people will state they have never created a full breakdown of income and expenditure let alone in the last couple of years.

Many people think that they have no disposable income. As few individuals ever get around to completing a detailed budget plan, they will be unaware of how much disposable income they have once they have paid all their regular bills. Most individuals don’t have much left over after paying bills, however, in some cases there will be an element of discretionary expenditure.

Many people feel that they have little or no control over their finances. Nudge is a great app that can help with this. Read on for more tips to better manage your money.

Budgeting on a low income

Managing your money on a low income takes careful organisation – here are a few positive steps you can take to make it easier.

Work out your budget:
First, you have to know what money is coming in, what’s going out and when. Making a budget gives you a clear picture of where your money goes and shows you where you might have a chance to save some. It will also help you see whether you are living within your means.

Work out how much money you have coming in (wages, benefits etc) and what you’re spending it on. Use the budget planner available from your bank or the money advice service to calculate this.

How to set up your budget:
Do you have more than one account? New services mean you can now see all your accounts in a single banking app.
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
  • Less 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

What you need:

Over half of UK households keep a regular budget. Most say it gives them peace of mind about how much they are spending and makes them feel better about life in general.

To get started on a budget, you will need to list the following things:

  • Household bills
  • Living costs (food, clothing, childcare)
  • Financial products (insurance, loans, credit cards)
  • Family and friends (birthdays and other celebrations)
  • Travel costs (train or car costs including fuel, tax, MOT and insurance)
  • Leisure (holidays, sport, restaurants)
  • Just grab as much information as you can about your income and spending (bills, bank statements…) and get started.

Now you have everything you need; you need to work out how much you’re spending vs the income you have every month. You can use the following techniques to do this:

  • Pen and paper
  • Spreadsheet
  • Free online apps such as:
      1. Money dashboard
      2. Loot
      3. Cleo
      4. Online budgeting tools
      5. Money Advice service – Budget Planner
      6. Citizens advice – Working out your budget