Page last updated at 03:27 GMT, Thursday, 24 January 2008

Friendly guide to personal budgeting

Money Talk
By James Winterbottom
Consumer Credit Counselling Service

James Winterbottom
James Winterbottom of CCCS

Budgeting makes most of us moan and groan.

But in fact it has never been easier with the array of online sources available for you to calculate your income and outgoings.

These resources may also point you in the direction of the best deals and make it easier than ever to pick and choose between suppliers.

The first step is to work out how much money you are receiving each month.


Include all your take-home pay - the amount you receive in your account after all deductions - and benefits.

Ensure that you are receiving all the benefits to which you are legally entitled - any family with a total income of less than 66,000 should be entitled to something.

It is estimated that around 8bn of benefits are unclaimed in the UK every year.

CCCS has found that people who have been to its welfare benefits service are under claiming by about 75 a week on average.

Turn2us provides a good online tool which calculates if you are entitled to state benefits.


Work out how much money you need to live.

Budgets are best done on a monthly basis

Be realistic - there is no point in working out a budget that is too tough as you will not be able to stick to it.

Ensure it includes all expenses for the family.

Budgets are best done on a monthly basis but do not forget all your annual expenditure, including bills that are paid quarterly or annually.

Check against the budget on the CCCS website to make sure you have not forgotten anything.

Or use the self-calculating one on the Financial Services Authority (FSA) website Moneymadeclear or Moneybasics.

Time your spending

Once you have completed this process, go back to see if there are any areas in which you can save.

You should also visit price comparison websites to ensure that you are paying as little as possible for your insurance, utilities, mobile phones and internet. offers one of the most comprehensive services or try Switchwithwhich?

Pay bills by direct debit as many companies offer discounts for paying this way.

You should now be able to work out how much money you have left over at the end of the month by taking away your living costs from your take-home pay.

What next?

Depending on your situation, you are now in a position to do one of three things.

If you have any debts, pay these off before starting to save

If you have money left over, you should save some of it.

The basic rule is to save enough to keep you going for six months if something untoward should happen such as losing your job.

If you have any debts, pay these off before starting to save.

Prioritise and pay off those with the highest interest first.

See if you can take advantage of 0% deals on balance transfers for credit cards allowing you to repay any borrowings without incurring any additional interest for a fixed period, but be sure not to spend on the card.

Above all make more than minimum payments on credit cards: if the debt is outstanding for more than six months, credit cards are an expensive way of borrowing.

Take action

If your budget shows you cannot meet your monthly credit commitments, either contact your creditors immediately or get in touch with a debt advice charity such as CCCS which now offers help online 24 hours a day at CCCS Debt Remedy.

But make sure that you keep up payments on your priority debts.

These are the ones which are vital to living (housing, heating, light, water) or which carry the severest penalties, such as council tax.

When it comes to budgeting, look in the mirror and be realistic about the sort of person you are.

Not everyone wants to change their electricity supplier or mobile phone every other month in order to save a few pounds or to take advantage of some introductory offer.

It makes sense however to overhaul your budget now and again as nobody wants to pay more than they need to.

But remember that if an offer looks too good to be true, it probably is.

If you are using online sites, make sure they are independent and reliable.

The most useful will usually have a good reputation offline, such as Which?, the FSA or Moneyfacts.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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