HOW TO: Plan An Effective Budget

If you're currently spending more than you earn, it's crucial to find a way to balance your budget. Those who don’t address the situation could find themselves in a downward financial spiral that’s difficult to escape.

Here are tips to help you balance your earnings and outgoings.  

1.   Boost your budget by saving on essentials

If your budget doesn’t balance or you’re looking to free up some extra cash, the first thing you should do is try to cut the cost of essential household goods and services. The changes you make aren’t likely to make you feel deprived – but they will help to keep more cash in your pocket.

2.   Cut the cost of your debts

If you have existing debts – particularly on credit cards – these are likely to be an expensive drain on your budget. However, taking out a new or a Life of balance transfer card could cut your interest costs dramatically, allowing you to pay off your debt more quickly. In turn, this will speed up the process of balancing your budget.

If you’re thinking of applying for a loan to consolidate existing debts, you should ensure you have a plan to pay off what you owe. Sometimes people who try to bring all their borrowing together in one place continue using their credit cards, ending up in a far worse situation than before.

3.   Assess the 'extra spending' in your budget

If your budget still doesn’t balance, it’s time to cut back on non-essential spending. This means prioritising the activities you get most enjoyment out of, and spending less on those that aren’t offering you good value for money. Spending less on going out and buying new things isn’t easy – but not cutting back now might mean you’re in an even more difficult position later. Remember, if your budget is out of balance in the long-term you’ll end up with debts that could be expensive and may take a long time to clear.

4.   Generate extra cash where you can

Alternatively – or to complement cut-backs in your spending – you could consider new ways to increase your income. First and foremost, if you have savings and investments that you’re relying upon to generate part of your income, make sure they are performing as well as possible.

In addition, consider freelance work if your employment contract allows it. Are there ways you could use your skills to generate a little extra income by working in your spare time? You could also sell unwanted items via eBay, could consider renting out your spare room or could even sign up to rent out your car when it isn’t in use.

5.   Get debt help if your budget won't add up

If you’re still struggling to balance your budget after cutting back on spending and are concerned about the amount of money you owe, it’s important to seek help as soon as possible. Spending more than you earn each month isn’t sustainable in the long-term, and will push you further and further into debt.