How to prioritise your spending

 

Sometimes it can be difficult to decide which bills and monthly expenses should be paid first. Especially if you’re on a tight budget. If you’re struggling to cover all your bills and need some guidance on how to prioritise, we have created a small guide to help push you in the right direction. Remember, no two circumstances are the same but:

Categorise your spending

First things first, make a list of all your expenses and separate them into categories. How you sort them is completely up to you, but here is a rough idea of what your list should cover:

• Housing
• Utilities
• Food
• Taxes (eg Council Tax)
• Travel
• Children
• Debt
• Treats

To learn more about how to do this, check out our blog on how to categorise your spending.

Identify your high priority bills

Your highest priority bills are about keeping a roof over your head. The first bills to pay each month are your rent or mortgage, and any other debts that are secured on your property.  If neglected, you could face added interest, late payment fees, legal action and possible eviction in the worst-case scenario. Bottom line: always pay these first.

Cover your essentials

Next up in your priority list are your essential costs.  You need water, and gas/electricity (depending on which you use) to stay warm and cook.  And of course, you need money in your budget for food.

Unlike rent and mortgage payments, there tends to be more flexibility with utilities. For example, if you’re struggling with your monthly electricity bill, you may be able to find a cheaper alternative by switching suppliers. These bills should be high on your priorities list but remember, there may be ways to reduce them.

Also in the essential category will be money that you need to spend travelling to work. This could be to tax, insure and run your car, or it could be your bus or train fare. You should always budget for these so you can get to work. If you have a loan for your car (or HP) then make sure you’ve covered that.

Your council tax should also fall into this essential category – but check if you are entitled to a discount.

Household spending

Remember to allow enough in your budget for other household essentials – such as clothes, personal care, school dinner money, your phone and broadband costs and so on. Again, these can be variable and for some – like mobile phone and broadband contracts – you can shop around to save money.

Don’t forget to include your TV licence in this category too.

Make unsecured debt repayments

Your lenders might not want you to think otherwise, but unsecured loan repayments, credit card bills and so on should only be paid once you’ve set aside money for the essentials listed above. That doesn’t mean that they aren’t important to pay, but it does mean that the consequences for missing them are less serious. If you can’t afford to make repayments, then don’t ignore them – speak to the lender to explain the situation or speak to an expert debt advice provider.

Make a list of your treats

If you’re struggling to balance your budget, it may be time to reassess monthly expenses that are treats, not essentials. Of course, everybody’s idea of what’s essential for them will be different and we certainly aren’t here to tell you what you should and shouldn’t be spending your money on – and we all need a treat now and then.  However, if when you are being honest with yourself there are things you are spending on that you could manage without, consider dropping them, even if it’s just temporarily.

Note down your budget

Once you’ve categorised your spending, create a budget planner to clearly outline what you have to spend – it’ll help you stay on track. To do this, simply calculate your income, minus your savings and other essential outgoings to determine how much you have left to spend. But doing this as a first step may help you decide which expenses can be cut from your monthly outgoings.

For more information about learning how to create a budget, check out our extensive guide.