When you are on benefits, it can be hard to manage money. Though you will try to land a new job as soon as possible, there might be some unexpected delays. When you lose your job, or you are not able to work due to any reason, income stops coming in, but expenses remain the same as before. It will certainly be a herculean task to stay on top of your expenses.
When you are on little or no income, figure out what types of benefits you are eligible for. Those benefits will serve as your income to help you tide you over until you land a new job. If your savings and benefits collectively are not able to help cover small emergencies, you can consider loans for people on benefits.
However, at the time of using these loans, you should carefully analyse so that you do not struggle with payments. Even though you are on benefits, it is essential that you create a budget. Budgeting is paramount to track your expenses to avoid overspending.
Ways to create a budget while being on benefits
Here are the ways you should follow to create a budget while being on benefits:
Know your exact income
First off, you need to calculate your total income. If you have any part-time job, side-gig or freelancing, you should club income from all these sources. Now check how much money you have been receiving in benefits. Your total income will include benefits as well. They are also regarded as your income. If you have no streams of income, benefits will be the only source of income. Make sure that you do not include income you are yet to receive.
Make a list of expenses
You will need to make a list of expenses. Once you have noted down all expenses, categorise them into fixed and variable. Fixed expenses include rent and housing payments, utility bills and insurance premiums. Though rent and premium remain the same, utility bills vary by consumption, but they are essentials. They are non-negotiable, which means you must have enough money to cover these expenses.
The next step is to create a list of variable expenses. They include groceries, household supplies, transportation (cab fares, fuel, etc), and medical expenses. You should create a manual spreadsheet to record each expense. This will help you know how much money goes where.
You can use a budgeting app if you find it hard to jot down every expense. You can link your bank account to your budgeting app. It will automatically fetch all expenses and record them in one place. However, transactions made in cash need to be posted manually.
It is essential to create a list of expenses because this will help avoid overspending. If you find that you are struggling to pay your expenses from the given income, try to cut back on your variable expenses.
An emergency cushion is still important
Even though you are on benefits, you cannot stop building an emergency cushion. Your regular contribution to your savings ensures that you will never struggle to cover unexpected emergencies. Your benefits and side gig will help you cover your regular expenses, but if you come across some unexpected expenses, you will need to dip into your savings.
After losing your job or after your financial situation is turned upside down, you might not be able to contribute the same amount as before, but you are still expected to set aside some money. Based on your income, you should determine how much you can afford. Even if you can ensure a contribution of £100, do it.
To build an emergency cushion, cut the cost wherever possible:
- Switch utility providers for cheaper deals.
- Seek help for food if you are badly off.
- Try to shop for generic products.
- Do not buy in bulk.
- Check for discounts and free recreational activities.
- Cancel unused subscriptions.
By cutting down on these expenses, you will be able to set aside some money for emergencies.
Prioritise needs over wants
When money is tight, you need to ensure that you do not spend money on unwanted things. You should try to live on a lean budget. It refers to a budget that helps you cover only essential expenses. Unless your financial situation changes, you should avoid discretionary expenses.
It is vital to understand the difference between needs and wants. The former includes expenses which are unavoidable, such as rent, bills, food and transport, and the latter includes expenses such as dine out, new clothes, footwear, entertainment and the like. You do not have to ban discretionary expenses. You do not need to refrain from enjoying your life, but make sure that discretionary expenses do not get in your way of meeting essential expenses.
With the help of a budget, you can easily take control of your spending. Choose a budgeting method that works for you. it could be 50/30/20 or 60/20/20.
Consider taking out a budgeting loan
Budgeting loans are available from the government. They are interest-free loans. You do not have to pay back interest. You only pay back the borrowed sum. This money is deducted from the benefits. However, not all types of benefits will enable you to take out these loans. Make sure to check your eligibility.
Budgeting loans generally help those who are struggling to cover their day-to-day expenses. If you are ineligible for these loans, you can consider taking out loans for people on benefits. However, these loans charge interest, and they are required to be discharged in one fell swoop. You might find these loans quite expensive. Chances are, you fall into debt. Make sure that you are certain about your repaying capacity if you use these loans.
The final word
You can create a budget even if you are on benefits. Try to assess your total income and expenses and check where you can cut back. Set aside money for emergencies and keep tracking your expenses to ensure you are not overspending.
