Effective household budgeting depends on finding a balance between your income and expenditure. Where expenditure exceeds income, particularly on a regular basis, you are facing a potential problem.
For most people income is usually relatively static from month to month although if you are self-employed or on short term contracts or receive performance related bonus pay this may not be the case.
To understand your household budget, you need to do 2 things:
- Work out your effective income
- Work out your expenses
Step 1: To work out your household income write a list of your income from all sources including:
- Your normal salary (and your partner’s if appropriate)
- Any regular overtime
- Bonus payments, averaged over your pay period if appropriate
- Child benefit
- Tax credits
- Maintenance payments
- Interest from savings/dividends
Step 2: List your expenditure.
Try to make this as accurate as possible and do not be tempted to underestimate bills or leave things out altogether. If you are going manage your household budget effectively you need to be realistic about what you are spending. You may need to record spending as you go for a period of a month in order to capture all of the small ad hoc expenses that can sometimes go unrecognised.
Once you have a comprehensive list you need to review your expenditure to clarify the priority of different expenses. Priorities need to be based on the potential consequences of failing to pay for these items.
| Priority Expenses | Consequence of non-payment |
|---|---|
| Rent/Mortgage/Service Charge | Repossession or eviction |
| Secured Loan | Repossession |
| Council Tax | Attachment of earnings/wages arrestment, Imprisonment (not Scotland) |
| Child Maintenance Payments | Attachment of earnings/wages arrestment, Bailiff action, Imprisonment |
| Income Tax | Bailiff action/Sheriffs Officer action, Sequestration, Bankruptcy |
| Utility Charges including Gas/Electric/Water | Loss of supply |
| Court Fines | Imprisonment |
| Hire Purchase debt | Repossession of goods followed by County Court action to recover any financial loss |
Once you have completed the inventory of priority expenses you need to list any unsecured loan (loans that are not secured on property) repayments averaging out any variable payments like credit card or catalogue repayments.
You can follow the link below to a downloadable budget sheet which will automatically calculate your disposable income once you have completed your income and outgoings.
If your expenditure exceeds your income, you are now in a position to see whether there are savings you can make. For example:-
- Make a shopping list for household essentials and stick to it
- Shop around to find the best prices for items you need
- Packed lunches for yourself and family can save a considerable sum over a week
- Review bill payment and see whether you can use direct debit to make savings and even cut out irregular payments that can be difficult to budget for
- Review any existing credit arrangements to make sure you are not paying excessive interest rates for store or credit cards
- Review your mortgage arrangements to see whether any savings can be made
The link below will take you to a section where you can review the options available if your efforts to balance your budget have not resolved your concerns.
workplacewellbeing.com assumes no responsibility for the content of linked websites.
