Living month to month, pay day to pay day, can be a monotonous slog akin to constantly swimming against the current. However, it’s a reality for many British families. A worrying 20% of British families have an ‘absolute’ low income once housing costs are taken in to account
It rapidly becomes a case of sink or swim, with those sinking falling in to a vicious cycle of debt. Debt can have a devastating impact on families, and whilst it is sometimes unavoidable, avoiding getting to the point of needing an IVA or Protected Trust Deed is advisable.
To keep afloat, despite the lack of pennies, here are our Top 10 Budgeting Tips for Low Income Families.
- Track Your Spending
Before coming on to our second tip, you’ll need to implement our first. Spend around 6 weeks tracking your spending. Record everything you spend no matter how big or small. Face up to your bank statements and use them to help you make sense of where your spending is happening. By the end of the 6 weeks you should have a clear picture of what’s coming in, and what’s going out. Make sure you include all household bills, leisure costs, travel, and even those random cups of coffee.
- Make a Budget
Yes, our second budgeting tip for low income families is to in fact have a budget. You won’t be able to keep a tight rein on your spending otherwise, and you can quickly haemorrhage funds without realising. However, if you’ve tracked your spending, and cut your budgetary cloth to fit, then you’re on the right path. You may need a reality and attitude check here – it’s not about being restrictive, but instead giving you the financial freedom that puts you in the driving seat.
- Tackle Debt First
If you end up with an IVA or Protected Trust Deed, it’s not the end of the world – but do try to avoid it by prioritising debt and always tackling it first. This includes all loans and credit cards, and make sure you focus on those with higher interest first. Remember that debt breeds debt, so if you can stay away from the red zone as much as possible this will help you no end.
- Stop Accumulating Debt
It’s no use tackling the debt if you don’t change your credit-using ways. Whilst debt isn’t all bad, the simplest way to stop it getting on top of you and impacting on your budget as a low income family, is to simply refuse to entertain it as a guest. Your grandparents were right when they told you not to spend what you don’t have.
- Look at the Big Spenders
Most people find that there are certain key contenders when it comes to eating up the family budget. Typically for most families the big whammy is housing costs. If you can shave 1% off the big costs, this will make a much bigger impact than 10% off a small cost. So think outside the box and see if you can reduce accommodation costs. You may be able to remortgage for less, or for cheaper rates; you may be able to move into more affordable housing; or you may even be able to get a lodger in and contributing to the bills.
- Be Sure You’re Getting What You Are Entitled To
Sometimes it’s all too easy to get caught up in the everyday battle of the budget without realising you’re actually entitled to help. No one is going to shout it out to you – you need to do the investigating yourself. So, if you’ve had any change in your circumstances, or simply because quite a bit of time has passed since you last did it, head on over to http://www.entitledto.co.uk/ and plug in your details to see that you’re getting all the help you can. Another good port of call if you’re unsure of your entitlement, or are struggling with budgeting or debt, is your local Citizens Advice Bureau (CAB)
- Plan Your Spending
Use your budgeting skills to identify just how much you have to spend and stick to it. Even that 80% off ‘bargain’ isn’t so great if it’s still out of budget. Be savvy, shop around, from groceries to kid’s shoes. Use tools such as MySupermarket to get the same groceries for less and take your time comparing goods and services online to ensure you’re getting the best deal.
- Look at the Small Costs
Whilst you’ll make the biggest savings by shaving small amounts off the big costs, don’t underestimate those sneaky accumulating small costs. That daily cup of coffee at the train station could pay for a new laptop over the year, and can be easily replaced with a thermos. Make a lunch rather than buying one daily at work, and consider knocking habits such as smoking, on the head.
- Don’t Shun Second Hand
With the likes of eBay, Amazon marketplace, and Facebook selling pages, you’re never too far away from good quality secondhand items. Many products, such as cars, quickly lose a big chunk of their value the moment they are bought. The trick is to get in a close second, with ‘nearly new’ items for a fraction of the cost of new. This can apply to all sorts – from white goods to electronics, and vehicles to clothes.
- When You Can, Save
We all have times that are leaner than others, but if you can, then save. No matter how small, regular payments soon add up and will give you a buffer zone should the worst happen and the breadwinner loses their job, or the washing machine gives up the ghost.
Being a low income family doesn’t necessarily spell debt and disaster. However, it does require a diligent approach to budgeting whereby everything coming in is known, and everything going out is accounted for.