Budgeting: Getting Started

Complete your financial self assessment

A financial self assessment will give you a clear picture of your finances and will help you to identify where you need to make changes. We recommend that you complete this step at least once a year, particularly if your income changes or you experience an unexpected or big life event (e.g. Marriage).

Calculate your income

In order to have a clear picture of your finances, you will need to know your sources of income. If employed your pay-slip will show you what you earn from that employment. Do not include overtime or any bonus as part of your basic wage. Insert this under the relevant heading. You may be getting social welfare benefits such as unemployment benefit and children’s allowance so make sure to include these in your income. You can get more information about these benefits from the local social welfare office or at www.welfare.ie. If you have extra earnings that you would classify as income, such as interest on savings or investment income, include them too.

Calculate your outgoings

Try to keep track of your outgoings. Although it can be an onerous task, it can help and it may be easier to categorise them into groups:

  • Daily expenses: This can include milk, lunches, bus fares, taxis, newspapers, phone credit to name just a few. Ask for and keep receipts for each item you buy and enter the cost of the item in your spending diary which can provide to you.
  • Ongoing expenses: These include household utilities such as electricity, gas, TV packages, phone, broadband and rent. You should retain copies of your bill as well as bank statements to give yourself a more precise idea of how much you are spending.
  • Loans & debts: You should list your monthly/weekly repayments on each debt, as well as writing down any arrears you have on your mortgage or other loans as this will affect your future budget.
  • Savings: You may be making regular savings to a deposit account or to our credit union. You should list all those savings or deposits you make on a regular basis. In order to have a full picture of your finances, you should list the balance you have in any of these savings accounts.
  • Other intermittent expenses: These may include items such as medical expenses, holidays, birthdays, insurance or TV licence.

If you find you have a surplus after reviewing your financial situation, you must then think about how you can make effective use of it. It might be saving for a child going to college or you might decide to pay off some of your loans quicker (highest interest first).

If it turns out you are spending more than your income, you need to assess how you could cut back on expenses.

If you are struggling with any loan repayments, you should contact your lender immediately to discuss your options.

Identify suitable goals/targets

Everyone has different goals. Whether it is saving for the family holiday, paying off debt such as a credit card or starting an account for that unexpected rainy day, you can achieve your target by planning ahead. Once you set your target, it will be easier to stick to your budget. When you have your goals picked, you must work out how much the goal will cost and how you will put money aside to achieve it. Again this means you need to make out your budget to work out how you will build up the money you need.

Possible goals

Short-term

– Pay debt (e.g. credit card)
– Save for family holidays
– Save for Christmas expenses
– Thinking of getting married
– Buying a house- Planning to have a baby
– School expenses
– Starting a rainy day fund

0 to 3 years

Medium-term

– Pay debt faster- Prepare for possible home renovations
– Save for children’s education (College)
– Put away funds to move to a bigger home
– Consider paying lump sum off loans (e.g. mortgage)

3 to 10 years

Long-term

– Start paying into a pension.- Look to clear long term loans early (e.g. mortgage)
– Long term financial security

10 years and over

Make your budget then stick to it

You should begin by deciding who this budget applies to. It could be a partner and family so you may decide to include them in the process and consult them regularly about how the budget is progressing. In this way, everyone will know where they stand and their boundaries. For this to work you must consider everyone’s income, spending and other financial or potential commitments.

If you are living with a partner, you may have shared expenses but you may still want to have a seperate budget for yourself. You may decide to open a joint account for the shared bills and then with the remaining income make your own budget.

Always be honest to yourself about your budget otherwise it will not work. Be as precise as possible and don’t overestimate or underestimate any aspect of your budget.

If you find yourself in a position where you don’t keep to your budget due to some unforeseen circumstance, don’t be discouraged. Just revisit your budget and start again. Give it time to get it right. The most important thing is to set yourself realistic targets. If you go too hard on yourself, you won’t keep to it.

Shop around, switch and save

If you shop around for financial products you can save money. Speak to the relevant people in these organisations and ask them about the costs and benefits of each product. Ask them for any options they have in relation to a similar service or product. Look out for offers in national papers or on the company websites.

If you’re not sure if you’re over-spending on household bills then contact other providers for their rates. Watch out for special offers and deals to help you compare and reduce your spending on groceries, light and heat, TV & telecoms. Watch for terms and conditions that tie you into long term contract with costly escape clauses. Shopping around and asking questions can help you save money and will provide you with useful tips on how to cut back.

Look at how you manage your bills. Are you paying some in advance at the cost of others or are you paying too late and incurring charges. Look at the way you are paying. Are you incurring unnecessary bank charges or are you being penalised for paying cash.

If you are still unsure you should seek out a qualified person that can advise you on all your financial needs. But beware to avoid unregulated bill payment and debt management companies.

 

 

 

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