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Budgeting to manage debt

Anyone who's serious about taking good care of their finances should have a well-planned budget. A budget sets out how much money you can safely spend after your essential monthly costs have been accounted for.

Managing your finances in this way helps ensure that you'll always have enough money put aside for your essential costs, and that your debt repayments are always covered.

How to set up a budget

To create your budget, you should start by looking at bank statements from the last few months and noting down all your regular costs - things like your mortgage/rent, bills, TV licence, etc. For costs that vary, such as food, put down a generous estimate (for example, if you seem to be spending around £90 a month on food, put down £100 to be on the safe side). And of course, make sure you include your debt repayments in this list.

Add up all these costs to find your total monthly outgoings. This is the amount you will need to put aside each month to make sure all your essential costs are covered.

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Then find your monthly take-home earnings, and subtract your total monthly outgoings from this amount. What's left can be called your 'available income' - the money you have left to spend as you wish each month.

What if my outgoings exceed my income?

If you put together a budget and realise that your income doesn't completely cover your spending, your first step should be to try cutting back on 'luxuries' - things like meals out, movie rentals, alcohol and so on. You may be surprised at how much money you can save this way.

However, this won't be enough to help everyone. If you have cut back in all possible areas but find you still can't cover your costs, it's quite likely that you'll be behind on your debt repayments, and you could be getting further into debt - in which case you should seek expert debt advice at the first opportunity.

Debt Advisory Centre provides debt advice and a range of debt solutions that could help you get back on top of your finances.

Complete our request a FREE call back form and one of our experts will call you to discuss Debt Help with you. We guarantee a response within 24 hours.