How to balance the books when money's too tight to mention
Thursday September 18 2008
Soaring household bills are putting added pressures on people who are already feeling the pinch of the economic downturn.
Householders have to deal with the rising costs of home heating oil, electricity and food in their budgets -- not to mention recent hikes in mortgage interest rates.
Some people are good at managing their money and putting aside funds to meet unexpected bills.
Others find it a struggle to balance the books each month and put bills aside in the hope that money will magically appear to pay them. So what are the best methods of allocating your hard-earned cash to meet all the inevitable household expenses?
"Personal borrowing in Ireland is at record levels, and, given the present financial and economic uncertainties, it's vital for people to manage their household budget carefully," says Kieron Brennan, CEO of the Irish League of Credit Unions.
The best resource for learning the basics of household budgeting is The Money Advice & Budgeting Service (MABS), which operates offices nationwide and offers free and confidential advice.
"The 'where did all the money go?' question is frequently asked because spending happens on a day-to-day basis, without any plan for taking care of how personal or family finances should be organised," says Michael Culloty, MABS spokesperson.
"Here is where a money management plan can help consumers to spend household income more wisely to meet priorities and plans.
"A good budget plan will have both short-term and long-term goals. It will have saving as an important aspect because it is only by living below your means that you can have a fund to cope with unforeseen circumstances or fund important things that lie ahead.
"A key to any budget plan is first to realise that you need one and that everyone in the household should be involved in drawing it up.
"Over the next few weeks, start keeping a diary of all household spending, as well as household income. This will give you and your family the information that is required to discuss the household finances and to put together a budget plan that covers all household needs and responsibilities, as well as saving for agreed plans and goals.
"There is nothing mysterious about a budget. It's simply a plan for the money your household expects to receive and how it intends to spend it."
To budget for bi-monthly bills (bills that are issued every two months), multiply the total bill by six to get an annual amount.
Then divide by 52 if preparing a weekly budget, or by 12 for a monthly budget.
If you're a member of a credit union, then check to see if your branch operates a Budget Account service.
This scheme, which is usually provided at a small charge, allows members to decide which bills they want to include in the plan.
They then estimate how much each bill will be over the 12-month period and total all of them up.
Members are advised to over-budget a little in case of emergencies and increases in the cost of some bills.
"Credit unions were founded to provide access to financial services and affordable credit for anyone who needs it," says Mr Brennan.
"Credit unions always encourage their members to save regularly -- even though it may only be a small amount."
If you receive Social Services payments, then you can spread out the cost of bills by applying for the Household Budget account. This service is run by An Post and allows you to pay regular amounts towards your bills directly from your weekly Social Services payments.
The rising cost of living has led to more and more low- and middle-income families struggling to cope.
However, taking some simple steps toward better money management can help to reduce both personal stress and financial strain.
