The Importance of Budgeting Your Home Finances
Whether you work or not, and however much you earn, the vast majority of UK residents live on some kind of budget – balancing your income and expenditure is essential regardless of your salary. For most people, a significant part of that budgeting comes into consideration when managing home finances, starting with sourcing the right mortgage and meeting those obligations every month.
It should go without saying that finding the right mortgage is of paramount importance. If you’re a first time buyer the process will be completely new to you and if you feel overwhelmed by it all, that’s understandable. There’s a lot to consider, and the infographic below this article, created and provided by the Money Advice Service, should help in laying out the required documents, your options, and next steps.
What may also be helpful is their mortgage calculator, which provides a guide as to how much you might expect to a pay a month; depending, of course, on the type of mortgage and the lender. You can also use the calculator to work out how much your monthly mortgage payment might increase in the event of an increase in interest rates.
Budgeting to plan for all outgoings every month is a sensible step: the first step towards taking control of your cash is to know exactly what you’ve got coming in and going out. Making a list of all of your income and expenditure helps you to systematically and fully list everything from the big bills to the Friday night takeaway! Everything counts.
To fully understand your outgoings, why not keep a spending diary for a couple of weeks? You’ll probably be amazed at how much you spend on the little things, which can all mount up without you fully realising. For example, if you spend £5 a day on lunch, £1.50 on a small coffee and a further, barely noticeable, £1 on snacks, this amounts to £7.50 a day – that’s a massive £1,800 a year. Equally, cancelling that £50 a month gym membership you never use could put £600 a year back in your pocket. Think wisely – if it’s something you can live without it might be considered a luxury. You might be better advised spending that money elsewhere.
Of course, nobody is suggesting you give up everything you enjoy, but pick what’s most important to you and factor it into your budget – don’t let it be a surprise cost.
When you know what you’re dealing with, your budget will also help you to prioritise the most important bills and costs first: mortgage (or rent); household heating and energy; food; any outstanding loans. Then you can identify where your opportunities for cutting back or saving are. Could you get a better deal on your insurances or energy, for example? Comparison websites enable you to compare different providers in one place to make sure you’re getting the most from your supplier.
If you are in debt, you may be tempted to consolidate your borrowing or look at short term loans to get you through. Before you take on additional financial commitments, make sure you’re not storing up problems for the future in the shape of high interest rates. There are alternatives to short-term loans, so check these out before you sign up to anything.
If you are finding your debt difficult to manage and are struggling to get on top of things, organisations such as Step Change, the debt charity, offer free and impartial advice. The helpline is open Monday to Fridays 8am to 8pm, and Saturdays 8am – 4pm – call 0800 138 1111 to speak to an advisor.
Seek out the right mortgage – An infographic by the team at Money Advice Service
Category: Budget
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