There are many households that already know how to manage a strict budget to stay in control of their finances. However, as the cost-of-living continues to affect finances of more households than ever before, many will need to re-budget regularly to manage their outgoings and make savings where possible to avoid getting into debt.
Our resident money expert, Sinead Campbell, Head of Money, Debt & Quality at Advice NI says that a different style of budgeting, defensive budgeting, is on the rise.
She explains: “As prices for our everyday necessities and our bills remain high, many households are budgeting in a way they haven’t before. Defensive budgeting is essentially a shift in how households are spending, by developing a strict realistic budget and continuously reviewing this as prices increase or circumstances change.
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"For instance, many of our clients are telling us that they choose not to put the heating on so they can afford to eat, or many say they choose to walk rather than spend on petrol. Whilst we recognise that making these decisions can be really hard for people, reprioritising where our money goes is actually a smart move in this climate, as it allows us to avoid using credit such as credit cards or overdrafts, or get deeper into debt.
“More people are at greater risk of debt as our incomes continue to be squeezed. In the last 12 months, along with our members, we have helped in over 4,000 households deal with debt amounting to over £35 million signalling that there is often a solution for people experiencing debt.
“We know the financial struggles that people are facing and are we are primed to help. We urge anyone worried about their situation to reach out to our network of debt advisers for support in trying to prevent or manage debt. You can also find self-help tools and resources on our website, such as a budget planner.”
Sinead’s has also provided practical advice to get the most out of our incomes.
Ease the effects of inflation
Sinead says: “Defining essential and non-essential spending is key – this is how you identify what you’re willing to live without and what you can’t live without. Essential spending is what you are obliged to pay, such as your mortgage or rent, rates, utility bills, groceries, medication and your annual essentials such as home insurance and car insurance. In many cases where an expense is essential, people might still save money by switching suppliers or trying to get a better deal from your current supplier. Non-essential spending on the other hand, are those items you might be able to live without. These will be different for everyone but could include a weekly gym class or gym subscription, an online subscription like Netflix, takeaways or paying for online delivery.”
Be realistic
Sinead says it is crucial to be realistic and set a budget you’re confident you can stick to. She says: “Once you know what your non-negotiables are, you know how to direct your spend each month. Accounting for every penny can help people stay on a healthy financial path. It’s important to remember that demands may change month-to-month, so we recommend revisiting your budget regularly to stay on top of it. Similarly, it’s important that as your personal circumstances change, your budget may change too. With this in mind, if you're still struggling to balance your budget after cutting back on your spending and are concerned, it's important to seek help as soon as possible.”
Direct any leftover income to savings
Sinead concludes: “Whilst not everyone will have money left over every month, when this does occur, we’d recommend directing to your savings so you have a little extra when something unexpected might occur. Having even a small amount in reserve will help to ease the stress that financial uncertainty can cause.”
Advice NI and its network consists of 65 members and more than 300 advisers across Northern Ireland all providing free, impartial and confidential advice. To access Advice NI’s money and debt advice service call 0800 915 4604, email advice@adviceni.net or visit adviceni.net/money-debt , you can also download self-help tools and resources via the website.
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