Eastbourne Citizens Advice Bureau
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Definition of budget
• noun 1 an estimate of income and expenditure for a set period of time. 2
the amount of money needed or available for a purpose.
3 (Budget) an annual statement of national revenue and expenditure put
forward by the Chancellor of the Exchequer.
• verb (budgeted, budgeting) allow or provide for in a budget
• adjective inexpensive
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Budgeting isn’t something that only politicians do.
Understanding how to budget is the key to getting to grips with your
money and keeping control of your finances.
Once you have set out the basics a little time each month is all you need
to keep on track.
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Income and expenditure
The idea of budgeting is to add up all the money you have coming in over a
set period of time. If you get paid weekly or monthly it is best to do the
calculation on that basis.
Then you work out all the expenses you will have during that period.
You subtract the expenses from your income and see what you have left. The
remainder is your disposable income which you can do with as you please.
Knowing the difference between essential spending and non-essential
spending helps you avoid getting into difficulties.
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Income and expenditure calculator
One of the tools we use to help people budget is an income and expenditure
This can be done as a handwritten list or by using a spreadsheet.
The income and expenditure form is available as an Excel Spreadsheet
and as a pdf file.
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We begin by completing the figures for income.
You may have different sources of income to those
listed. Everything should be added up. The key to
completing both income and expenditure is to stick to
either weekly figures or monthly throughout, whichever
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Then we look at expenditure, the amounts we spend regularly. The list shown
here is a guide to help you remember the main expenses. If you have other
expenses not listed remember to add them.
Feel free to add any additional expenses you think of.
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Once we have totalled up everything we subtract the expenditure figure from
income. This shows us how much money we have at the end of each month,
often referred to as disposable income.
Income minus expenditure =0
When we have spent money on essentials what we have left at the end of the
month is ours to do with as we please.
Hopefully this figure will be a positive amount. However when our spending is
more than the money we have coming in, this figure will show as a negative
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It may seem impossible to spend more money than you have coming in,
but many people do it.
It means they are using money from other sources, such as drawing on
their savings or borrowing from family and friends. Or borrowing from a
bank, building society or finance company.
Borrowing money can be a safe and useful thing to do but without a good
idea of how much is coming in and out of your pocket, you can soon get
Budgeting helps you avoid this.
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Budgeting example 1
Let’s look at an example:
• Jim is 23 years old
• he has a full-time job that pays him £850 a month
• he has no other income.
Earnings Other benefits
Partner’s earnings Other income
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Budgeting example 2
• Jim rents a flat for £350 a month and that includes all bills. He does have
to pay for a TV licence that costs £10 a month.
• Jim estimates he spends around £100 on food and household items and
about £50 a month on clothes.
• He doesn’t have his own car yet and he spends £80 a month on bus and
• He spends around £50 a month on his mobile phone and around £60 a
month on cigarettes.
• At a guess he spends about £100 a month on various things like CDs and
Let’s total those figures.
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£800 monthly spending
leaves Jim . . .
Income minus expenditure = £50
£50 is left at the end of each month.
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Budgeting results 1
Putting everything on paper has shown Jim that his financial
situation is OK, perhaps a bit better than he realised. He’s not
overspending and still has something left over at the end of each
month which he could put into a savings account.
He can also see certain things which he could reduce, such as how
much he spends on clothes, mobile phone and cigarettes – all non-
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Budgeting results 2
His spending is reduced partly because his utility bills are included in the
rent. If he is thinking about moving to another flat he would probably have to
allow for more expenses such as bills and council tax.
He is also thinking about buying a car which would take the money he
presently spends on fares. He would have to look into how much it would
cost to buy and run a car.
If he wants to move and buy a car at the same time he will have to budget
carefully beforehand to avoid getting into difficulties.
If he sticks to the same pattern of earning and spending he will be able to
make plans for the future with more confidence.
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This simple technique can help you keep control of your money. Many
people are surprised by how much they spend on certain things
because they have never added them up before. This can lead to
making changes and economising.
Once you know what your disposable income is you can make plans for
the future based on a proper understanding of what you can afford and
how you can use that money.
However, there is one crucial ingredient: willpower.
Once you have worked out your budget and how you want to use your
money you have to stick to it.
Otherwise the whole calculation starts again.
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It is important to do your calculations on the same time period, ie weekly or
To convert weekly figures to monthly multiply by 52 to give the annual total
and then divide by 12 to give a monthly total.
Rent is £100 a week
£100 x 52 weeks = £5,200 a year
£5,200 12 = £433.33 a month
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Converting monthly figures to weekly
To convert monthly figures to weekly multiply by 12 to give a yearly amount
and then divide by 52 to give a weekly amount.
Rent is £500 a month
£500 x 12 = £6,000 a year
£6,000 52 = £115.38 a week
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Tips for budgeting
• Allow time to work out your income and expenditure each month.
• Use your bank statement to check all essential spending.
• Keep a record of your spending and review it once a month.
• Keep receipts wherever possible.
• Set up standing orders or direct debits for rent, telephone, utilities bills and
other regular payments. This can help you budget and make sure you don’t
forget to pay bills on time.
• Set aside an amount each month for savings if you can and include this in
your expenditure calculation.
• Think ahead for any future expenses you can predict such as birthdays,
Christmas and start of term. Plan your saving toward these dates.
• Be aware of your present financial situation – how much your current balance
is and how much you owe. Avoiding the subject will only make it worse!
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Get help with budgeting
• If you feel you are getting into debt seek advice as soon as possible.
• Consult a student welfare adviser at your college or university or visit your
local Citizens Advice Bureau. They will help you get control of your finances
and help deal with any priority debts.
• Before deciding to borrow money check to make sure you are getting the
best deals. Check out any interest free offers first. Compare interest rates and
aim for the lowest APR. Don’t forget the cost of payment protection insurance
• If you are a student open a student or graduate bank account if you haven't
already got one.
• Visit the cashpoint as rarely as possible. Try withdrawing money for a week
and sticking to your spending plan.
• Spend carefully. Compare prices for the same items in different shops to find
the best deal. Why pay more for the same thing? Consider buying second-
hand goods if available. Visit your local charity shops for a bargain!
• Find out if you are entitled to any discounts and take advantage of them.
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Activity 1: How much does it cost?
This exercise is designed to give you an idea of how much things actually cost
and the possible variations in price and quality.
• Attached is a list of items for which you have to find a cost.
• For each item you must provide a source of evidence to support your finding.
• Evidence could be a clipping from a newspaper or magazine or a receipt.
• Also a note of the source of your information is acceptable, eg compact disc –
WH Smith £9.99.
Possible sources of information include:
• visits to local shops
• local newspapers and publications
• friends and family
• personal experience
• the internet.
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Your research is done as homework followed by a reporting back session in class.
You can discuss your findings and consider:
• what you think is a reasonable price for an item
• what you think is a waste of money
• what difference does quality make to your spending
• anything that surprised you – either cheaper or more expensive than you expected.
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How much do things cost?
Housing: for each consider (a) a one bedroom flat, (b) a three-bedroom house
3 Council tax
4 Insurance: buildings or contents
5 Water and sewerage rates
Food: enough for 4 people
1 Weekly shopping
2 A takeaway meal
3 A restaurant meal
4 A round of drinks
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1 Car tax – annual amount 1 Concert tickets
2 Petrol – weekly 2 Tickets for a play
3 Insurance – annual amount 3 Cinema tickets
4 MOT 4 A CD
5 Repairs 5 A DVD
6 Servicing 6 A video game
7 Parking 7 A night out with friends
Travel: from home to school or college Household goods
1 A TV and DVD player
1 Bus fare
2 A hi-fi music system
3 A three-piece suite
3 Train ticket
4 A dining table and chairs
5 A bed
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Activity 2: Budgeting case studies
For each of the following examples complete an income and expenditure sheet
and work out the person’s disposable income. You can use either the income and
expenditure calculation sheet or spreadsheet.
1 A single man living alone in a rented flat. He works 37 hours a week and earns
£900 a month. His monthly expenses are:
Rent £200 Travel £50
Prescriptions £20 Food/Household items £170
Council tax £100 Telephone £40
Clothes £30 Electricity £20
Water rates £10 Newspapers £10
TV licence £10 Gas £20
Sewerage rates £10
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2 A husband and wife and two children under 16. He lost his job through ill
health and his wife looks after him and the children. They receive £598 income
support, £564 child tax credit and £164 child benefit each month. Rent and
council tax are paid by benefits.
They have the following monthly expenses:
Water rates £15 TV licence £10
Sewerage £11 Travel £75
Food/Household items £785 Car insurance £15
Electricity £60 Breakdown cover £10
Gas £60 Car tax £15
Home insurance £15 Telephone £30
Health costs £30 Newspapers £10
Clothes £130 Nappies £30
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3 A single man lives with his son and was recently made redundant. He is
receiving job seeker’s allowance of £240 a month. His monthly expenses are:
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4 A single woman earning £1,040 per month. Expenses:
Car insurance £34.66
Car tax £9.58
Hire purchase (car) £ 171.87
Are there any areas where you think economies could be made to non-essential
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