Managing your finances

As a new parent, you'll have one more (very important) reason to keep your finances in good order. Here are some tips for making the most of your money.

Budgeting

If you're serious about keeping on top of your finances, budgeting properly is just about the most important thing you can do.

To create your budget, you'll need to look at your bank statements from the previous few months (providing your spending patterns are fairly regular, the last three months should be fine).

Make a list of all your regular, fixed expenses (e.g. mortgage/rent, insurance), and how much they cost. For costs that vary, such as trips to the supermarket or phone bills, give a generous estimate of how much you're likely to spend over the next month. It's better to put too much aside than too little.

So, as an example, let's assume your total household income after tax is 1,500 a month. (Of course, this is just an illustration, and everyone's income and outgoings will vary.)

LIST OF REGULAR EXPENSES

  • Mortgage/rent - 450 per month
  • Home insurance - 15
  • Energy bills - 60
  • Council tax - 100
  • Water - 30
  • Phone bills (approx.) - 40
  • Food (approx.) - 150
  • Internet - 20
  • Car insurance - 50
  • Petrol (approx.) - 60
  • Savings - 200
  • TOTAL - 1175

In this example, your essential expenses come to a total of 1,175. So your monthly income of 1,500 minus 1,175 leaves you with 325 spare income, which you can spend as you wish.

There may also be a few less regular but equally important costs that will crop up only once or twice a year - for example, your TV licence or MOT for your car. If your spare monthly income is unlikely to cover these, it may be worth spreading out the cost by putting a little extra aside each month.

Saving

Creating a budget takes care of your finances in the short term, but what about further down the line? Saving is a very important part of good financial management that offers security for the future, as well as protection against the unexpected.

Any savings are better than no savings at all, but it's worth searching around for a savings account with the highest interest rate you can find. The higher the interest rate, the more your savings will grow, and the more worthwhile it will be.

However, keep in mind that the savings accounts with the highest interest rates often have special rules attached to them (e.g. you cannot touch the savings for at least a year).

If you have debts that are causing you problems, you might want to consider paying these off before you save. This is because the interest on debt usually grows more quickly than interest on savings, meaning you'll pay less in the long run by paying off the debt first.

However, if you are coping well with your debt repayments, it can still make good financial sense to put money into savings. If you're unsure, seek advice from a financial expert.

Spending money wisely

The cost of bringing up a child will mean you'll want to make the most of the money you have.

Take advantage of special offers

When you go shopping - particularly for essentials like food - pay attention to special offers. You're likely to be buying in bigger quantities now, so things like 'buy one, get one free' could help you save a lot of money in the long run.

Vouchers & coupons

Vouchers and coupons are a very useful way of getting items for free or at a cut price. You'll quite often find these in magazines (particularly supermarkets' own magazines), newspapers and leaflets.

There are also a lot of websites that link directly to useful voucher codes - so have a search online to see what's available.

Loyalty cards/schemes

A lot of stores, especially supermarkets, offer loyalty cards that enable you to build up credits or points that will earn you money off future purchases. Some supermarket loyalty points can also be put towards other things, like air miles and holidays.

Go to Part 3 - Preparing for the future

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