Chapter 3 - Budgeting

Careful budgeting should see you and your kids through nursery, primary, secondary school and beyond. Being a single parent means that your budget is likely to be a tight one for a long time.

Let’s face it, kids are expensive. Come to that, life is expensive! Have you ever reached into your pocket expecting to find that last tenner only to realise that you’ve spent it on bits and bobs – Jack’s school trip money, the launderette and that magazine? The list is endless.

You may think that this just proves that money disappears and so budgeting is a waste of time. But budgeting can take the strain off you more than you realise. A budget is a first step towards being in control of your finances. It is a plan that helps you to identify regular income, expenses and savings. A budget will also help you to identify the level and importance of your expenses and help you to see exactly where your money goes.

If you are negotiating payments to a creditor you will also need to draw up a budget to show what you can afford to pay – a money adviser can help you do this, see useful organisations.

Why budget?

Making a budget helps you to:

• get rid of stress by planning and monitoring your spending habits;
• know whether or not you are in control of your finances;
• know how much money you have coming in each week or month, and how much you have to spend;
• cut back on unnecessary spending;
• show a creditor what you can afford to repay; and
• save money!

When you budget…

…be accurate

It is hard to be sure how much you spend on food, bus fares, magazines and the other bits and pieces. The best way to be accurate is to keep a notebook for a month and write down absolutely everything you spend money on, then you can work out what, on average, you spend per month on food, rent, gas, etc.

Go through all your bills and make sure you put in any money you give to your kids.

…be honest

There is no point being wildly out with your calculations, even if it is to make some bills look a little less bad! The only person you will fool in the end is yourself.

…review your budget

You should review your budget each month to make sure the amounts are still accurate and from time to time you may want to alter your priorities.

How to create a budget

Budgeting is not difficult, although it may take some concentration and a bit of work. You don’t need to be a financial wizard or a maths genius to do it!

Creating a budget

Use the sample budget form and follow the steps below to create your budget.

1. Work out your income (including wages, benefits and tax credits).

Make sure you are taking your net income, that is, your income after tax and National Insurance have been taken off. The example on the form shows you the type of areas your income could come from

2. List your regular commitments.

This includes things like Council Tax, mortgage, rent, heating, insurance and so on.

3. Add up what you are spending on normal day-to-day living expenses

This includes things like shopping for food, clothes, transport, entertainment and so on.

4. Record what you spend on occasional items

Such as birthday and Christmas presents, repairs or decorations to your house or flat, holidays and so on. You don’t buy these items regularly but it is helpful to put an amount to one side for them every month.

5. Make sure that you work out your income and spending for the same period.

For example, if the income is a monthly figure, the spending should be a monthly figure as well. The example below explains how to do this. 6. Add up your income and then add up your spending. If the spending is more than the income, you need to look at where you can save money and whether you can increase your income.

The information in the rest of this booklet will help you to do this. It is important to review your budget every month and adjust it as your income and expenses change.