When you start living independently there is a lot to think about. As well as paying for your rent you will need to cover the cost of bills and other expenses. When you are working out how much money you need to live on you should also consider how much you spend on food and any transport costs you have.
The best way to keep on top of your money is to make a budget. This will give you an idea of how much cash you’ll have once you’ve paid for all your essential expenses.
Start by writing down how much money you get paid, after tax. It will be marked as you net pay on your payslip. Then make a list of all the things you have to pay for every month. That will include your rent, any bills, council tax, and an estimate of how much you spend on food.
It’s also a good idea to set aside some money for unexpected costs. Allow another 10% on top of what you have to pay out for each month. Add all of this up, these are your total outgoings.
If you deduct your outgoings from what you are paid, you’ll be left with your disposable income. This is money that you don’t need to live on so you can spend it on what you like.
You might also be able to claim some benefits. Benefits are there to support you if you aren’t earning very much money. You might be entitled to housing benefit to help with the cost of your rent. You could also get a discount on your council tax depending on your situation.
There is also job seekers allowance. This is a benefit for anyone who doesn’t have a job but who is actively looking for work. You can also apply for this benefit if you have a part-time job and need more hours.
Applying for benefits can be complicated. If you don’t know where to start you should visit your local Citizens Advice Bureau to get some help.
Managing your money is important. If you get into debt it can quickly spiral out of control. There are lots of ways for you to borrow money and at the time it might seem like a good idea. You can borrow money with an overdraft, a loan, a credit card or a store card. There are also payday loan services. You should think very carefully before you borrow any money.
Before you borrow any money you should: ● Think about whether you need to spend that money at all.
● Work out if there is any other way you can pay for something without getting into debt. Could you wait a few months and save up the cash you need, for instance.
● Make sure you can afford the repayments. Don’t forget that you will have to pay interest on any money you borrow. Make sure you understand what this means, how much you will have to pay each month and how much you will pay back in total.
I need to borrow some money. What’s the best option?
Once you are over 18 there are many ways for you to borrow money, as mentioned above. Once you’ve decided that you definitely need to borrow money the best option will depend on your circumstances.
Speak to the Citizens Advice Bureau if you want to understand the options that are open to you.
If you need to borrow money in the short term, such as to cover important bills before you get paid, you could get an overdraft through your bank. This will allow you to take out more money than you have in your current account. Interest rates can be high and if you don’t set up the overdraft properly you can face big charges.
A personal loan through your bank is an option if you need to cover larger expenses, such as buying a new car. These often have the best rates of interest. You will agree to pay the loan back in monthly instalments.
Credit cards are another form of borrowing. They tend to be best for short-term borrowing as the interest rates can be very high. If you take out a credit card you will have to make a minimum repayment each month, but it’s better if you can clear the whole balance to avoid high interest charges.
Payday loans are a very short-term kind of borrowing. They have incredibly high interest rates so you should only use them if you really need to and you can’t find the money you need anywhere else.
Should I borrow from a payday lender?
Payday lenders can seem like a good option because it’s quick and easy to get your hands on some cash when you need it. Their purpose is to provide you with some extra money to cover you until your next payday. This means it’s a very short-term kind of lending.
The interest rates charged by payday lenders are really high. Much worse than what you would get from a bank. As well as high interest rates, there are heavy charges for missed repayments too. This means debt can quickly spiral out of control if you don’t pay it back as agreed.
Before you borrow money from a payday lender you should make sure there are no other options open to you. You should never use payday lenders regularly. Only borrow what you actually need. Don’t be tempted to take the whole amount the lender will offer you.
You should also make sure that once you have paid back the loan you can still afford your bills next month. If taking out the loan is going to mean you are in the same situation again next month, you need to get help with managing your money.
I’m in debt and don’t know how to get out of it. What can I do?
When you get into debt it can feel very scary. You can constantly worry about money and sometimes it can be hard to see a way out. You might feel embarrassed and not want to discuss it. But you should get help.
Everyone’s situation will be different so you need to find an approach to debt that will work for you. Speaking to a charity like National Debtline[https://www.nationaldebtline.org/EW/Pages/default.aspx] or Step Change[https://www.stepchange.org/] is a good place to start. They offer free advice to people in debt and can help you work out the best way to get your money back on track.
I don’t think I can pay my bills this month. What can I do?
Firstly, don’t panic. Start by working out what you can afford to pay for. You should prioritise your outgoings. So make sure you have a roof over your head and food to eat. If there’s any non-essential spending on your list, take it off.
Don’t deal with this alone. Talk to a friend if you need some moral support. You could also contact your family to ask if they would loan you some money. Show them you’re serious about sorting out your finances and tell them when you could realistically pay them back.
You should also talk to your creditors. That’s anyone you need to pay. Start with your landlord. People are often more understanding than you think they will be. Most companies, like water, gas and electric companies, will have systems in place to help people who can’t pay their bills in the short term.
If you have this problem often, you should get advice from a charity like National Debtline about how to manage your money.
How can I work out what benefits I’m entitled to?
Benefits can be very confusing. It can be hard to know what you’re able to claim for and how much you will receive. But it is worth finding out if you could get some help as it can make a real difference to your life.
The government recommends two free-to-use benefits calculators[https://www.gov.uk/benefits-calculators] to help you. You’ll need certain information to get the results but then you should have a clearer idea of what you can claim for. There is also a lot of useful information about the different benefits on the Citizens Advice Bureau[https://www.citizensadvice.org.uk/benefits/] website. If you are still struggling to understand benefits, you can contact them to get some help.
How can I start saving money?
Having savings can make you feel more financially secure. It can give you a bit of breathing space if you have any unexpected expenses. And it can mean you can treat yourself to things you want from time to time without worrying about how to afford them.
Getting into a good savings habit while you are young will help you throughout your whole life. If you want to start saving you should make a budget. Work out what your disposable income is and then save some of it each month or week. A good place to start is by putting 5% of your disposable income into savings.
Opening a savings account will help you keep this money separate and you’ll get interest paid on it too. There are various savings accounts available, so do some research to find the best one for you.
If you want to make sure you’re not tempted to spend money you’re supposed to be saving set up a direct debit straight to your savings account each month. If this goes out on the day you’re paid, you won’t be able to spend that money on something else by mistake.
Did you know?
-8% of young people in the UK were finding it difficult or very difficult to get by financially in 2013/14
-Private renters in the UK pay an average of 41% of their income in rent each month
-26% of all problems dealt with by the Citizens Advice Bureau between July-September 2016 were debt issues
Please be aware that this is NOT for emergency help. CLICK HERE for information on emergency help.