Good budgeting is the key to personal financial health, and there are a number of online tools to help you keep tabs on your spending, writes BARRY MCCALL
AN ALL-TOO-FREQUENT feature of newspaper letters pages or radio talk shows is the financial plight many thousands of individuals around the country find themselves in as a result of the recession. And it is not just those people unfortunate enough to have lost their jobs who find themselves unable to afford basic household necessities.
Pay cuts and tax increases through measures such as the Universal Social Charge have left many people struggling to balance the household books. This is perhaps best evidenced by the latest statistics showing the dramatic increase in mortgage arrears.
But simply telling people in this position to spend even less is at best unhelpful. The editorial in the most recent edition of The SVP Bulletin, the quarterly magazine of the Society of St Vincent De Paul, put it quite strongly: “Many people are in a situation where they have to examine carefully every euro and cent they have and on what they can spend it. There is an obscenity in Irish life today that many in leading influential positions, on the high levels of pay which some sectors of Irish society still enjoy, tell the less fortunate they must suffer more.”
Part of the solution to difficulties of this nature is budgeting. Knowing exactly what’s coming in and where it’s coming from and what’s going out and where it’s going to can go a long way to helping make ends meet and restoring peace of mind. But budgeting isn’t easy. Very few people are naturally good at it. Fortunately there is a lot of help out there both from the main financial institutions and organisations such as the Money Advice and Budgeting Service (Mabs) to assist people.
“In the good times budgeting was a prudent thing, but in these times it is absolutely essential,” says Mabs spokesperson Michael Cullity. “But people often don’t do it. We frequently find that it is an exercise which hasn’t taken place.”
According to Cullity, the budgeting process is crucially important even if it’s only for information-gathering. “You need the basic information and you get that through the budgeting process. You need to know what you’re spending on the priority things like food, mortgage, electricity, gas and so on. That will tell you what you’ve got left over to spend on the non-essentials. Also, if you are going to negotiate with a creditor, you absolutely need this information if you are going to be able to come to a sustainable arrangement.”
The Mabs website ( mabs.ie) includes an excellent budgeting tool. In a simple interactive process which takes as little as 20 minutes, it helps produce a fairly comprehensive personal or household budget. It begins with an income sheet which is used to record all sources of income including wages and salary after deductions, any social welfare payments received, child benefit payments, and contributions from other people who live in the home.
The next step is the spending sheet.
This includes spending on items such as mortgage or rent; food and housekeeping, including groceries, toiletries and cleaning materials; utilities, such as gas and electricity; hire purchase and car loans; clothing and footwear; education costs; and telephone.
Of course, it is not easy to estimate spending on other areas such as magazines and newspapers or the occasional night out. Mabs offers a downloadable spending diary which you can use to record all spending over a period.
“We don’t always remember every euro we spend. For example, you might pop into a shop to pick up a newspaper or you might give the children the odd euro to buy sweets. It is this type of spending that often goes unnoticed, and sometimes we forget about it. And it all adds up,” says Cullity. “The spending diary will help you with this and may also help you find places where you can cut spending.”
The Mabs budget tool then calculates your available income or the amount you need to save; the site also offers useful tips for saving money and increasing income.
“There can be easy ways to save money such as making a packed lunch at home and bringing it to work rather than buying lunch out. It is things like this which the spending diary and budgeting tool can help with.”
But Mabs is by no means the only source of advice and assistance. AIB offers a very good, easy-to-use budget calculator as part of its Masterplan Account which is designed to help customers plan their spending over the course of the year and spread the burden of their bills evenly over the 12-month period.
Bank of Ireland too has a very good budget planner available on its website ( bankofireland.com). Again, this takes a customer through a very comprehensive income and expenditure-recording process before delivering an overall result, along with a monthly cash flow forecast which not only tells you how much you might be short, but when it is likely to happen.
Tackling unsustainable debt
WHILE BUDGETING may be able to solve current issues with income and expenditure, it will not necessarily help with historic debt.
Mortgage arrears, large credit card bills and other unpaid debts may not be able to be repaid even under the most strict budgetary regime. The answer here is to look for help immediately and approach creditors as soon as possible.
“Pick up the phone to us in Mabs on 0761-072000 and we’ll be happy to help,” says Michael Cullity of Mabs. “Frequently we find that people have responded to pressure by agreeing payment plans with creditors that are actually unaffordable. The most important thing is to get all the information together so that you have a sustainable proposition to put. We have found that creditors are much more amenable now to working with people in difficulty, but they will not be so helpful if the person in question has a poor track record with them already.”
He points out that such agreements with creditors don’t necessarily involve adopting a complete hairshirt lifestyle. “There is space for a social life and there is space for savings,” he says. “If you don’t allow room for these things, the chances of an agreement going belly-up are quite high.”
Mabs has come together with the Vincentian Partnership to develop a Minimum Income Standard Calculator to assist people in this regard.
Available on misc.ie, the calculator shows the income people need in order to afford the goods and services that members of the public have agreed are a minimum essential for everyone in Ireland to have. In other words, it shows what you should aim to have left over after coming to a repayment plan with creditors.
For people having to negotiate with creditors, Cullity recommends approaching it in quite a businesslike way and putting the creditors in order of priority. “Priority debts would be mortgage or rent or utility bills,” he notes. “Credit cards and other loans should be a lower priority.”
It should also be noted that all of the main banks and financial institutions have now put considerable resources into providing structures and processes to assist customers in difficulty. The most important thing is not to let the problem grow so big that it is beyond resolution.
