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The following guest post was contributed byDebt Advisory Centre.
A budget can help you to identify where you’re going wrong with your spending and where you could cut back. This is really important if you’re in debt, for two reasons:
First of all, the sooner you can repay a debt like a credit card, the less interest you’ll be charged overall. Secondly, if you’re overspending, you’re probably getting into the habit of living on borrowed money. What happens when you reach the end of your credit limit or get seriously worried about the repayments? Addressing your spending with a budget is the first step to finding out if you really have debt problems and understanding whether you could change your habits to overcome them.
If your budget reveals you’re overspending every month, you need to do something about it – and the sooner you do, the better.
Making changes to your budget
Naturally there are certain expenses that you simply must pay every month and these include your mortgage, rent or lodgings, as well as utilities, food and the cost of transport to and from work, car insurance, family expenses, etc.
You can simplify your budget by paying your utilities byDirect Debitor standing order monthly, so that a fixed amount leaves your account on the same day each month – preferably right after payday so that you can’t accidentally spend that money! You may even be able to find a better deal on a cheaper tariff for certain utilities.
Also, look out for any patterns to where and when you withdraw cash or pay expensive debits – especially if there are times you withdraw or spend excessive amounts. It could be that certain places or days of the week make you spend excessive amounts, and you might want to address that.
Take an honest look at your discretionary spending. If you have nothing left over after paying for everything you need, you’re not alone. One in five people in the UK is in that situation, according to recent research. If this is because of your debt obligations, seek debt advice: you may be able to come to a new agreement with your lenders.
Talk to your lenders
If you do want to negotiate a more affordable repayment plan with your lenders, your personal finance budget will be absolutely essential, because it will help your lenders to understand how much you can realistically afford to repay every month.
If, on the other hand, you don’t talk to your lenders, how will they be able to help? How will they know you even need help? There’s often debt help available that you may not even be aware of. In fact, there are whole departments within banks and other lending organisations that specialise in working out affordable repayment plans with people who are struggling with their repayments.
Risking enforcement action by your lenders simply isn’t worth it. There are people who can help you to deal with debt problems.
Check your budget regularly
Your personal finance budget will change from month to month and year to year, depending on what you need to buy as well as any changes to your income, or your circumstances.
It’s also worthplanning your budgeta few months in advance, so you can plan ahead for birthdays, holidays, quarterly bills and annual expenses. If you are able to, try to set aside part of your income regularly for additional expenses like these, rather than struggling to afford them when they arrive ‘out of the blue’.
This article is provided by theDebt Advisory Centre, part of a group that’s spent the best part of 20 years helping people tackle their debt problems and improve their financial situation.
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