Effective Budgeting (U.K Article)Budgeting Effectively There is currently a worldwide economic meltdown occurring around us, having a knock-on effect from our assets (such as property and vehicles) right down to the cost of food and essentials we need for everyday life. This has worried many of us about the damage that it is having on our finances and that a new way of thinking needs to be implemented to get back on track and budget more effectively. Many people feel that they are in control of their money, however in most cases it is in fact their money controls them. How many times have you had to turn down a social occasion due to lack of available funds, or had to go without something essential as you are not due to be paid for another week? Many of us are dependent on their wages coming in and have no contingency fund if something jeopardises their available funds (for example redundancy, your vehicle breaks down or your boiler packs in). During an economic meltdown, these problems become worse as everything increases in cost, proving even more difficult to remedy the mess that one problem may cause. This could result in anything from bank charges to health issues such as stress. Effective money management is a skill that can be learnt by anyone and all is needed is realisation of your finances and willpower to stick to the budget you have decided on. Firstly, you need to write down all sources of income you receive monthly (wages, benefits) with a note of the date that you receive the funds. Then you need to write down all your essential payments you make on a monthly basis (rent/mortgage, bills, insurance) also with a note of the date you make the payment. Please note that you need to take into account quarterly income/payments as these will also affect your budget. As you may be aware, banks generally charge you a fee of, lets say, £25 for going over your available balance. You may think that £25 is not a lot of money, however you need to remember that they charge you this amount for EVERY transaction over your available balance. So therefore, if your bank balance is £20 (no overdraft is used in this example) and you have two payments coming out, the first for £50 and the second for £25, you will be charged twice as the two transactions took you over your available balance. This is £50 in bank charges, which is a lot of money to waste on something that could have been avoided with a little money management. Not only do you have to find the money that took you over your available balance, you have to also find the £50 that the bank charged you for going over your available balance. This can result in a downward spiral into even more bank charges. The above paragraph brings me on to the following ... There is no point just taking your income figure and deducting your payments to find that you have a balance remaining. This is not money management as you need to know exactly when your payments will be leaving your bank account to make sure that you do not have a shortfall one day resulting in a bank charge. I personally use a spreadsheet to calculate my monthly budget. You do not need to be a wiz kid on a spreadsheet to manage your money, you can do it all on paper, all you need is a calculator to figure out your available balance remaining. Take your time to make a note of non-essential items you pay for on a weekly/monthly basis ... A night out with your friends, rental of a DVD, purchasing clothes ... You need to decide where you can save some cash here as these are the items you can live without. Take into account my non-essential monthly purchases and give yourself a weekly amount to spend, with a bonus when you get paid to spend on what you like. Work out how much you owe to creditors (credit cards, catalogues) and rank them in order of importance to pay off. I recommend that you pay off the higher interest debts first as you will be paying way more than you need to pay them as you will be incurring a percentage on your outstanding balance in interest that can be lowered by paying more off than your minimum payment. Aim to pay off your debts as soon as possible as this will increase the value of your credit file and will look more attractive to possible lender in the future for a mortgage or a new car. If, however, you feel that your debts are too high and are considering debt consolidation, please read through all the paperwork first very carefully. You may find that you do not have enough funds remaining to afford to live. Seek advise from your local Citizen Advice Bureau before you go any further with your consolidation and be sure to research and compare many debt consolidation companies before signing up. Elizabeth Evans writes on cash budgeting related issues. You can learn more by visiting my blog, Money Management Advice Article Source: http://EzineArticles.com/?expert=Elizabeth_Evans
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