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If you’re planning to borrow money, will your monthly budget stretch to cover repayments?
Start by making a list of everything you earn, and what you spend, giving you a picture of where your money is going, and where you could make savings. Could your money work harder?
It could help you to plan your spending and keep closer track of what’s coming in and going out:
For many people, wages from an employer is their main source of income, but you might also receive money from:
If you share financial commitments, such as a mortgage, joint accounts or utility bills, it’s worth reviewing your entire household income, even if you usually keep your personal finances separate.
Money can be a stressful topic for many couples, but knowing where you stand could help you to tackle financial problems, and take a step towards your shared or personal financial goals.
It’s also important to make sure you can afford to cover financial commitments you’re solely responsible for.
List out your essential monthly expenses, which could include:
Then think about things you pay for less often – perhaps once or twice each year:
Finally, there are the things you might want to save up for:
Compare your income with your outgoings. Are you living beneath, within or above your means?
There are many benefits to following a budget and living within your means:
Saving could give you a safety net should the unexpected happen. It’s also often cheaper to save for the things you want, rather than using credit, as you’ll avoid interest, fees and additional charges.
You could also put your money to work by investing, aiming to increase your balance in future. It’s just useful to remember that the value of investments and any income from them can fall as well as rise, and you might get back less than you invest.
By adjusting your current spending, you might be able to save more money each month:
Even small purchases add up, so it could help to keep a note of everything you spend. You could set yourself a monthly budget after all of your essential living costs are covered, and you’ve set aside a regular savings amount. You’re more likely to pay attention to costs if you have cash in your pocket, rather than paying by card, so that could be a handy way to keep track of your spending.
It’s up to you how often you review your budget, but it’s sensible to take a look any time:
Consider whether you’ll be able to manage the repayments over time, including any borrowing costs, like interest, fees and charges.
Would you be able to manage if the unexpected happened, or your circumstances changed, like increased interest rates, reduced hours at work, a period of sickness or being made redundant.
Lenders and other service providers will usually complete a credit check as part of their decision-making process. In addition to information from your credit record, they might also consider:
A budget could help you to understand your financial position, then make more informed decisions.