A self-help guide to better money management
Your financial wellbeing is important. Money worries can have a big impact on your day to day life, causing stress, problems in relationships and even affect your physical and mental health. Being in control of your money is key to good financial wellbeing. Whether you are skint, just about surviving or want to start saving for a rainy day, there are steps you can take to make your money work for you.
Being in control of your money starts with understanding what income you have and what you are spending. This can be tricky, especially if you have different sources of income paid at different times of the month.
Our quick and easy budget planner tool will do the hard work for you. Simply add in the amounts and choose the frequency of payments in each of the boxes and let the tool work out your overall budget and make some suggestions on how to improve your financial outlook. You can also choose to save your completed budget to check back at a later date.
Some tips for completing your income and outgoings:
- Always use net income - check your wage slip, Universal Credit statement or bank statement to check exactly how much you are paid after any deductions such as tax, national insurance and pension contributions.
- Working out your spending can be daunting - a good place to start is with regular, fixed amounts such as rent, council tax and other direct debits
- Use bank statements to work out how much you realistically spend on things like groceries, travel and other regular day to day expenses. If you normally prefer to pay in cash, check your statement to see how often you take money out at a cashline and how much you tend to withdraw.
- Don't forget any 'hidden' expenses. These could be things you only need to pay annually like a car MOT, vaccinations for your pet or new glasses. Budgeting for these costs throughout the year could save you falling short in the month they are due.
After you have worked out your income and outgoings, your next move should be to check that you have accessed all available financial support to maximise your income.
A range of social security benefits are available to help people with a low income. You do not have to be out of work to make a claim and how much you are entitled to will depend on your individual circumstances. A number of benefits can be claimed even if you have some earned income coming into your household:
- Universal Credit
- Council Tax Reduction
- Housing Benefit for people who cannot claim Universal Credit
- Disability benefits such as Personal Independence Payment., Disability Living Allowance for a child under 16 or Attendance Allowance for people who have reached state pension qualifying age.
- Carers Allowance
To check if you might be entitled to make a claim to top up your income, our simple benefit calculator should take no more than 10 minutes to complete and can help you to identify what to claim.
Financial Support Grants
If your income is low you may qualify for a one-off grant to help with the cost of a range of essential items. To qualify, you will usually need to be in receipt of a means tested benefit, but many working households may still qualify if income is low.
- Warm Home Discount - an annual credit of £140 to your electricity account to help towards winter fuel costs. People who get Guarantee Pension Credit are known as the 'core group' and are paid automatically. Many suppliers also have 'broader group' criteria for the most vulnerable households such as those with very young children or someone with a disability or long term health condition. Applications usually open every summer and a new application will need to be made each year. Check if you are eligible for a Warm Home Discount from your supplier.
- Best Start Grant - payments for families are available through Social Security Scotland. Payments are available for new babies, early years and school age children. Click here to check if you are eligible to claim a Best Start Grant
- Free School Meals and Clothing Grants - Families with school age children may also be eligible for help with school related costs. The criteria for free school meals and clothing grants are slightly different so Check the criteria for help with school costs here.
For advice and support to make a claim, contact the Advice Shop on 01506 283000 or email email@example.com
If your income is maximised, the next step toward improved financial wellbeing is to look at your outgoing costs to see where you could make savings.
Switch and Save
Try using price comparison tools to check that you aren't paying more than you need to for household bills. Some of the areas you could make savings include:
- Gas and electricity - it's a good idea to compare prices at least once per year, around the time you receive your annual statement. Even if you don't want to switch providers, you can contact your current supplier to check if they can give you a better price. Be careful to check for early exit fees and,. if you usually qualify for a Warm Home Discount, check that the supplier participates in the scheme before switching.
- Broadband - as more and more services move online, reliable broadband has become a necessary expense for many households. Consider factors such as speed and usage as well as price to help you find the best deal.
- Mobile phone - if your handset is in good working order, consider a SIM only deal. Many providers now offer month to month SIM only contracts meaning that you are free to take a new deal whenever you wish to.
- Bank account - you can compare both current and savings accounts online. Many banks offer incentives for making regular deposits and some offer cashback on household bills. Comparing accounts online makes it easier to check that you are getting the best return for your money
It is important to consider a range of factors before making the switch as the lowest price isn't always the best option for your needs. This handy price comparison guide from the Money Advice Service tells you all you need to know before you get started.
Deal with Debt
We often need to borrow to make big purchases and when debt is affordable and well managed this can be a normal part of day to day budgeting. When you can no longer afford to reliably repay debt, this can lead to bigger problems and significant money worries. The earlier you can get on top of things the better to help you stay in control and avoid long-term consequences.
If you are worried about debt, the Advice Shop offer free advice and support to help you get things under control. Our team of specialist debt advisers can provide:
- Help to deal with secured or unsecured debts
- Assistance with Council Tax arrears
- Negotiation with creditors on your behalf
- Advice on bankruptcy
- Help to access different government schemes for dealing with debts
If you are having difficulty keeping up with your repayments, it is important to speak to your lenders at the earliest possible opportunity. If you are struggling financially or need help getting your debt under control, the Advice Shop can help. Contact us using our quick and easy online referral form. An advisor will contact you directly to discuss your situation.
Credit is used when a customer receives something of value then agrees to pay the lender back at a later date, usually interest is charged by the lender.
When used responsibly, credit can be a very useful tool to help with financial planning. it is important to recognise that not all debt is bad. Debt only becomes a problem when repayments become unaffordable or unsustainable.
Your ability to obtain credit from a lender will depend on your credit history. Not having any credit history can also affect your ability to obtain credit.
There are some simple steps you can take to help build a good credit history:
- Get on the Electoral roll
- Open a bank account
- Take out a small form of credit , like a mobile phone contract
- Manage your household bills
- Set up Direct Debits-late or missed payments affect your credit score
- Limit Credit applications - too many in short period can make you look desperate for credit
- Try and use no more that 25% of your credit limit, a higher balance can reduce your score.
There are a number of benefits that come with having a good credit score:
- You will have access to credit with lower interest rates
- You will be offered higher credit limits
- Access to more offers from a wider range credit providers
Credit reports contain information about your credit history within the last 6 years.
Your credit report contains:
- the name of the company or companies you have credit agreements with
- the date the credit was obtained
- the type of credit (loan, credit card, catalogue etc)
- balance outstanding
- payment history and details of any missed payments
Lenders use credit reports ,when you apply for credit ,to help them decide whether or not to lend to you.
If you miss a payment then the lender can update your credit report and this can affect your credit score.
The Cost of Credit
Interest is calculated and charged as a percentage of the purchase price.
You must always check the amount of interest you will be paying on top of the purchase price to make sure you are getting the best deal.
Don't just look at the repayment amount because you think it is affordable, quite often you will end up paying back close to double the cost of the item;
- Washing machine costs :£ 337
- Repayment amount : £6.39 per week
- Number of weeks :104
- Representative APR(Annual Percentage rate) :119.9%
- Total Payable :£664.56
Consequences of Non-Payment
Missed payments are recorded on your credit file making it harder to obtain further credit.
Lenders have different ways of dealing with unpaid debt. It can vary dramatically between lenders.
They will have their own timescales for when they take further action , how they contact you and their attitude when they contact you. In general, when you miss payment(s) you can expect the following to happen:
Missing one or two payments:
- Your creditors will generally start with reminders by phone or in writing , asking you to bring account up to date. They may be sympathetic and ask if there has been a change in circumstances which has made it hard for you to pay
Missing three or four payments:
- Your creditors might threaten further action, you may receive calls more frequently. They may advise that you see free debt advice. They will send a default letter(this advises you have broken a credit agreement) and they will record a default on your credit report, this will make it a lot harder to get credit.
- Your creditors might also pass your debts over to a debt collection agency to try and recover the debt. You will then start receiving letters from new companies asking you to set up a payment arrangement with them.
Missing five or six payments:
- By now creditors have sent multiple letters and may be looking to take further action, possible legal action to recover the debt
- Creditors could send out a letter requesting you attend court, they will be looking for repayment in full within 14 days or could look to try and arrest earnings or your bank account.
It is in your best interest to seek advice as soon as you start falling behind or have difficulty keeping up with repayments.
The Advice Shop offers free debt advice service where we can look at a variety of debt solutions. Contact us using our quick and easy online referral form An advisor will then contact you directly to discuss your situation.