Now more than ever it feels like the money in our pockets doesn’t come close to covering even our basic needs. The rising cost of living and the imminent loom of Christmas around the corner is going to make the end of the month a very worrying time for a lot of people. It’s when bills have to be paid and the spending priorities of the next few weeks decided upon. There’s everything from store accounts to school fees, clothes, medical bills, groceries, rent and the ever increasing rates for the basics of electricity, heat and water.

Okay so you’re aware of all this and sufficiently stressed about the whole situation. The key now is to react to this stress in the right way. The worst thing you can do in this situation is bury your head in the sand. Ignoring bills and hoping they won’t catch up with you or to carry on spending far beyond your resources in the hope of a magical silver bullet down the line is a quick way to end up in a debt trap. It’s also how you can damage one of your most precious assets – your credit record.

The preferred response to these scary things is to keep a level head, to control the debt and improve your financial standing. The best way to accomplish this is to budget, in just the same way a Finance Minister does for their country once a year. The best way to plan the roadmap of your finances is to look at the whole year to come then drill down into a detailed budget for each month. Using your budget like a map can tell you how much you are spending, what you’re spending it on and help you correct wrong-turns you may be making. 

We recommend you continue reading the two tips below to help you fully develop a robust budgeting roadmap that will help to guide you through the year to come.

Check the ins and outs

First you need to work out how much money is coming in and how much is going out every month. Write down your total income, either for yourself as an individual or for the whole family. Include extras like overtime, rent from extra accommodation you may have and from part-time work done by other members of the family. It’s best if you take an average of your earnings over the longest window possible – take an average of the last three years if you can. 

Then list all the bills you have to pay and your expenses. Be as ridiculously detailed as you can. You’re doing the hard part now, once you create a ‘sorting bucket’ for each and every expense it’s much easier to allocate your spend every week as you’ve already got a dedicated space to fill in on your budget. Taking this ultra-detailed approach you’ll rapidly see how healthy your financial position really is and where there is fat to be trimmed. To help you get started with this we recommend downloading Wonga’s free budget template here. The template is one of the more detailed breakdowns we’ve found online and it’s conveniently set up for you in Microsoft Excel format to adopt as is or edit to suit your specific needs.

Set up systems and keep it physical

We might sound a bit boomer here but we recommend buying a few files and using them for all your bills coming in. File them as they arrive and, when you sit down to do your budgeting at the end of the month, you will have them all at hand (literally). Pay them together once a month, usually, the day after payday. 

Use another file to store all your receipts and bank statements, plus copies of any letters you have sent or received about your accounts. Start a new file at the beginning of every tax year so that your records run from the beginning of March to the end of the following February.

Having the physical bills in your hand makes managing your finances a much more tangible action. The tactile experience of still dealing with paper for your bills will help you build better attitudes to how you deal with your finances. In an age where everything is digital it can be deceptively easy to ignore (or forget) when bills are due. It’s harder to ignore these when you have a physical pile of papers waiting to be sorted. 

Remember budgeting requires discipline. There’s no gain without pain. At first, it may seem like a real hassle, but the long-term benefits far outweigh the initial pain. Be sure to keep your old records for at least three years. It’s very important to have original documents if there are any queries later on. As you get more smart with your money you may want to include other useful tools in addition to your basic budget plan.