Being able to manage money is an important life skill. As you approach adulthood, you may have access to more money such as from work and the beneﬁts you claim yourself.
When you turn 18, your money becomes yours and should not be included in the household income. Therefore, it is important for you to understand and learn the skills of how to manage money.
Managing money is also called budgeting. The key to budgeting is to spend less than you earn. When managing money, you may ﬁnd it helpful to divide it into the following categories. This will make it easier to make decisions about money and avoid accidental overspending.
- Spend money wisely on things you must have – these are needs
- Save money for the things you like but can live without – these are wants
- Set aside money for unexpected expenses, such as when something breaks down and needs replacing – these are savings
Budgeting will help you to keep track of what you are spending and help you avoid spending money you don’t have. It will also help you to decide whether you can afford to buy something you like.
How does it work?
When working out your budget, list all the money you have incoming each month and then list all the things you regularly spend money on. You can then put some money aside in savings to help cover unexpected costs like repairs and long-term goals like holidays. Spending can be regular ﬁxed expenses, variable expenses or one-off expenses.
- Fixed expenses can be for items like rent or utility bills for gas, electricity, council tax, water, phone, house and personal insurance.
- Variable expenses such as for items like food, things for the house, maintenance, entertainment, clothing, haircuts and transport.
- Unexpected costs/long term goals such as for ﬁxing leaks, boiler repairs or holidays.
When budgeting, you should:
- claim the beneﬁts you are entitled to
- look at a price comparison website to make sure you are not overpaying for a service
- make shopping lists and choose where you shop
- save energy to reduce bills
- avoid paying estimated bills for gas and electricity or get a smart meter
- open a bank account