If you're looking to cut down your spending, your budget will be divided into three areas:
1. Fixed Spending
These are fixed costs, and you will be able to do little to reduce them.
- Mortgage payments or rent,
- Council tax,
- Water (unless you have a meter, where you'll be able to save money by cutting down your usage),
- Childcare costs (if they are used to enable you to work and so earn more to repay what you owe).
2. Essential Spending
There are items on which you must spend something, but not necessarily the amount that you are currently spending.
Gas and Electricity
You will be surprised how much you can save by turning off the lights when you are not in a room and switching off the TV at the mains rather than leaving it on standby. Turning down the central heating by just one degree can save you almost 10% on your heating bill. And you'll be helping save the planet too!
You may also be able to shop around for cheaper deals. It's possible to save up to £100 a year by switching suppliers.
Food
Generally, lenders will allow debtors approximately £40 per person per week for food when setting up their financial statement, so you'll need to make sure you shop wisely. Before you go shopping, make a list and stick to it, unless you see food that's massively reduced. Try to buy fresh produce from markets not supermarkets, as it's almost always cheaper. Also consider cooking in batches - cooking large amounts of food and freezing it is much more cost effective both in terms of buying the ingredients and the energy used to cook the food.
Insurance
You may be able to make massive savings on home buildings and contents insurance by shopping around - click here to find a huge choice of insurance providers.
Cash
You should be able to make big savings by cutting down the amount of cash you take out. Cash is often used for impulse purchases: a cup of coffee, a magazine, a lottery ticket - all things that are not essential.
Telephones
Cut out unnecessary calls, and make vital ones shorter. Consider whether the mobile is really essential - if it is, would you be better switching to a pay-as-you-go plan?
Transport
You may need to ask yourself if a car is essential, or can you manage to get to work by bus or train? Car costs are high, not only in petrol, but also in tax, insurance, servicing, and MOT, so if you can do without a car altogether, you'll be able to save thousands. Unless you can prove that you have no other means of getting to work, a creditor will need a lot of convincing that money to run a car should be classed as essential spending.
Clothes
Some spending on clothes can be classed as essential, particularly clothes for your children. But you cannot expect to spend too much on new clothes when you are in financial trouble - and certainly not for yourself.
3. Non-Essentials
This is where you'll have to be ruthless and make most of your budget cuts. Items include:
- Cable or Sky TV subscriptions
- Holidays
- New furnishings or decoration for the house and garden.
- Presents for family and friends
- Leisure activities
