Managing money

Money can be a very complicated issue and many people experience financial problems at some point in their lives. There is no need to feel embarrassed or to panic but it is important not ignore it as it won’t just go away! There are lots of sources of information and advice to help you manage your money and to get to grips with any financial problems you may be experiencing.

First steps - write a budget

Writing a budget isn’t really hard, sticking to it may be harder! It doesn’t need to be anything complicated; you can even find Apps to help you.

Step 1
Draw a line down a piece of paper.

Step 2
List all your income including wages, benefits and allowances.

Step 3
List all of your expenditure. Be honest; include everything including your morning coffee! If you are not sure what you spend your money on try keeping a spending diary for a week.

Step 4
Add up the two lists, hopefully you have more income than expenditure, if not you need to have a look at your spending.

Look carefully at your spending, is there anywhere you can cut back? Maybe you could bring your lunch in from home or spends less on a night out.

If you are struggling to keep track of your spending try spending in cash. It is hard to monitor how much you are actually spending if it all done on plastic. If you have actual cash in your wallet it is clear to see when it is all gone and if that happens to be halfway through the week then you will have to have some quiet nights in!

Step 5
Is there any way you can maximise your income? Have you applied for everything you are entitled to such as benefits or bursaries? If you are not working, could you get a part-time job?

Step 6
If you are still spending more than your income then you may need to seek further advice.

The following organisations are a good starting point:

www.adviceguide.org.uk/england/debt
www.moneyadviceservice.org.uk
www.moneysavingexpert.com

Are you confused by the language of money? Check out our Jargon Buster for some help:

AER: Annual Equivalent Rate. This shows what the interest rate would be if the interest on savings were paid and added to savings at the end of each year. The higher the AER the better the return is on your savings.

APR: Annual Percentage Rate. This tells you the cost of a loan, taking into account the interest you pay and any other charges. A loan with an APR of 15% is more expensive that one with an APR of 11%.

ARREARS: Money owed that is not paid by the due date.

CCJ (County Court Judgment): This is an order made by a judge to settle a claim brought in the county court

CONSOLIDATION LOAN: A loan which combines (consolidates) all your debts into one monthly payment.

CREDIT CARD: Plastic card which allows you to make purchases now and pay for them later. You must pay back at least a minimum amount each month and interest will be charged if you do not pay off the full amount borrowed.

DEBIT CARD: A plastic card that can be used instead of cash when making a purchase. The amount spent is taken, or 'debited', automatically by computer from your account.

DIRECT DEBIT: Is an instruction to your bank to release money automatically from your bank account to pay a regular bill.

GROSS PAY: This is your pay before anything is taken away from it, like income tax and National Insurance contributions.

HIRE PURCHASE AGREEMENT: A form of credit agreement which allows you to pay for goods in instalments.

NET PAY: The pay you actually get after tax, national insurance and other deductions have been taken off. Also known as “take home pay”.

NON-PRIORITY DEBT: This is a debt which cannot directly result in the loss of something essential, such as your car or home. This means they do not have to be treated as a priority. The most common non-priority debts include: credit card debts, unsecured personal loans, catalogues and mobile phone bills.

OVERDRAFT: If more money is withdrawn from your current account than you have put in, you will go overdrawn. If you go overdrawn without asking the bank in advance, they might refuse to pay your cheques and charge you a high interest rate on the money that you owe them.

PRIORITY DEBT: These are debts which are more important than others because the law lets the people you owe the money to take serious action against you. Priority debts include things like hire purchase and mortgages because the thing you’re paying for (like your car or home) could be taken away if you do not keep up your repayments.

SECURED LOAN: Money borrowed from a lender, using your property as an extra guarantee of repayment. If the amount is not paid in full, the lender may repossess and sell the property.

SUB-PRIME LENDERS: Lenders willing to make loans to people who are unable to obtain credit from mainstream lenders.

TAX CODE: This code tells your employer how much tax-free pay to give you during each pay period.

UNSECURED LOAN: Money borrowed from, for example, a bank, which is not secured against your home. The lender may sue for payment if you default on the loan.