Top Five Tips for budgeting in a DPP
Using a Debt Payment Plan (DPP) can be a great way to get your finances back on track, but, like any debt solution, it is not without its challenges. Because you will be expected to pay a set amount towards your debt every month, or risk the plan failing, it will be necessary to live within a budget for an extended period of time. This can be difficult, but a little planning ahead will make the experience much less stressful. Below we outline our top five tips for successful budgeting.
Make Room for Savings
Setting aside some money every month for an emergency fund is a vital part of every good budget. Even if you can only manage to set aside £10 or £20 each month, it is worth having. This will allow you to build up a financial buffer for when you are met with unexpected costs, such as car or home maintenance, meaning you are less likely to resort to further borrowing. Although setting aside some money for these savings will detract from what is available to other areas of the budget, it is far cheaper in the long run than having to borrow and pay interest. To ensure your savings are not swallowed up by other expenses, it is a good idea to transfer them to a separate bank account at the beginning of each month.
Keep Careful Track of Spending
When it comes to making a budget, half the battle is knowing exactly what you spend, and where. This means you can draw up a budget which accurately reflects your necessary expenses, and shows you areas in which savings could be made. With online shopping and contactless technology, it can be a more difficult time than ever to keep track of your spending, but by making a conscious effort to record every expense, you can gain the insight needed to formulate your budget. If you think you might have trouble remembering to record each transaction, consider using a debit card exclusively, rather than cash withdrawals, since all of your purchases will be recorded on your bank statement.
Make Savings everywhere and anywhere
A budget which has some wiggle room is more likely to be successful, and the best way to free up some extra cash is, obviously, to find areas where you can cut back. This does not necessarily mean making sacrifices, but it could mean putting in some time to find a better deal. For instance, check you are with the best value broadband, energy, and mobile phone providers for your needs. This can save hundreds of pounds every year, without really impacting your quality of life. You could also make savings by cancelling subscription services you rarely use, or considering cheaper alternatives. If you currently pay for satellite TV for instance, you could consider switching to Freeview, or using an online streaming service. Making a series of small savings can also have a huge impact on how much money you have available overall. You could make simple decisions, such as avoiding coffee shops and bringing your own lunch to work, buying things you need second hand, and being more efficient with energy-use at home. If your budget is still stretched tight, it is worth considering how you could bring in some extra money. You might consider selling unwanted items, taking on extra hours at work, completing paid surveys, or selling photographs online to give your income stream a boost.
Keep your Goal in Sight
Falling off the budgeting bandwagon every once in a while is pretty much inevitable – sometimes costs emerge which you just can’t avoid. However, it is important not to less this dishearten you, and keep pursuing your goal of paying off your debts. If this goal seems a little too nebulous to motivate you, take some time to think about what being debt-free will mean for you. You might start saving for a holiday with the money you currently put towards your DPP, you could work towards buying your own home once your debts are cleared; you could use the money to save for a new car – or something completely different! When sticking to a tight budget has you feeling stressed, think of this goal, and be confident that if you keep following the path you are on you can achieve it.
A flexible budget is a successful budget. When planning your monthly spending, bear in mind that it will fluctuate, and you may have to readjust how much cash you designate for each expense. Certain items, such as your rent or mortgage payments, are likely to be consistent, but areas of spending such as food and energy can vary depending on the time of year and other factors. You will probably have to make several adjustments to your budget – moving money from one expense to another – before it will successfully balance at the end of the month. This can be a long process, so try to be patient – budgeting takes practice!
Hopefully with these tips you will be well on your way towards sticking to your DPP and paying off your debts. If you are still unsure whether making use of the DAS is the right decision for you, call Creditfix on 0808 2085 198 for confidential advice. To learn more about how the DAS works, click here.