Click here for information in PDF format
Supported by Abbey Charitable Trust
Moving out of home is exciting; no parents to tell you to tidy your room or what time to come home but, alongside freedom comes new responsibilities. Gone are the free meals, free lifts and the cheap accommodation. Not only will you have to do all your own washing, you’ll also need to learn how to pay for your new-found independence too.
This guide will take you through the basics of managing your money and provide a bank of resources you can tap into for more information.
Take control of your finances - don’t let your finances take control of you.
Budgeting
Budgeting means monitoring and controlling your spending. A budget allows you to see where your money is being spent and whether that spending reflects your priorities. Many young people see it as a waste of time, in fact, 80% of young people aged 18-24 don’t keep a budget, but it is vital if you want to avoid the upset that money struggles can bring.
The easiest way to start budgeting is by filling out a budget sheet. These can be downloaded from many different sites on the internet or, use the budget sheet overleaf (only include your partner’s income if you are working out your joint budget and sharing incomes and expenses):
To fill in this sheet online, visit: www.creditaction.org.uk/infosheets.html (see Personal budget plan below)
Remember: we can not always budget for every possible expense. Once you have worked out your budget, you should set aside a bit of money to cover any unexpected outgoings.
Every few months, take a look at what you have been spending your money on and see if there are any ways you can cut back costs. For example, if you regularly use public transport, look into buying a travel card or if you’re spending a lot on groceries, make a list before you go and stick to it to avoid impulse buying.
Personal budget plan
You don’t need to complete all the sections of the budget plan and you may find it easier if you download the excel version from the website, indicated at the bottom of this page, as the plan will automatically up-date as you input your calculations. Remember that when filling in a budget plan it is important that you insert weekly or monthly figures throughout or you will get an inaccurate result.
If this budget plan is too complex, a simpler budget calculator can be found at www.moneymadeclear.fsa.gov.uk/tools/budget_calculator.html
Leading a life of independence
There are lots of costs on top of your rent or mortgage repayments that you may not be aware of, but you will need to budget for:
• Council tax
• Utility bills (gas, electricity, water, telephone)
• Insurance
• Travel
• Food
• Clothing and socialising
• Christmas
Moving out of home is not cheap and you need to be sure you can afford to pay for everything before you make the leap! You’ll need to be organised and make sure everything gets paid when it should.
Financial Do’s and Don’ts
Do
• Do take note of where your money goes
• Do switch to cheaper energy suppliers and providers
• Do save for short and long term expenses
• Do understand the costs of living away from your parents
• Do work out your budget
• Do make sure you claim all the benefits you are entitled to
• Do make sure you’re paying the right amount of tax
Don’t
• Don’t ignore debt
• Don’t move out before you can afford it
• Don’t be afraid to ask for help
• Don’t underestimate your living expenses
• Don’t let money worries affect health and fitness
• Don’t wait until you’re older before thinking about your pension
Paying your bills
Most companies offer schemes to help you spread the costs of your bills over the whole year or you can set up a Direct Debit or Standing Order with your bank.
The easiest way to pay your bills is by Direct Debit. This payment method means you don’t need to remember to pay your bills every month as the money is automatically debited from your account and, it can also save you money and allows you to spread the cost of many of your bills. Typically you can expect to save at least 5% on your household bills. It will also save you a lot of bother writing cheques etc. The only downer is having to carefully manage your cash flow to make sure you have sufficient funds in your account - more about that later.
To pay by Direct Debit ask your service provider or check on your bills for information about payment methods. Your service provider will tell you how much the payment amounts are and when they will be collected. They also have to notify you of any changes in writing. Once the Direct Debit is set up your bills are paid automatically and on time.
One way to easily save a bit of money is to shop around for the cheapest gas, electricity and water provider. Visit www.uswitch.com
Benefits: what are you entitled to?
If you are sick or disabled, there are a number of different benefits and tax credits you may be entitled to claim.
• If you have care needs or problems getting around, you may be able to claim Disability Living Allowance or Attendance Allowance
• If you are unable to work, you may be able to claim Statutory Sick Pay, Incapacity Benefit or Income Support
• If you work, you may be entitled to Working Tax Credit
• Council tax reductions
Remember that you may be able to get other benefits as well including Housing Benefit and Council Tax Benefit, depending on your circumstances.
Disabled Facilities Grant
A Disabled Facilities Grant is a local council grant to help towards the cost of adapting your home to enable you to continue to live there. A grant is paid when the council considers that changes are necessary to meet your needs - and is happy that the work is reasonable and practical.
As a disabled person, you will be entitled to supported housing, the support being anything from an intercom on the front door to having a personal assistant, depending on what you require to live independently. The Disabled Living Foundation provides information on disability equipment, household gadgets and new techniques.
For more information contact your local government office or visit:
Direct Gov: www.direct.gov.uk
Entitledto: www.entitledto.co.uk
Managing your money
Bank Accounts
Different people need different things from their bank account so it’s a good idea to shop around the high-street banks to find an account that’s right for you.
For more information visit:
www.moneyextra.com/banking
www.thisismoney.co.uk
www.moneysupermarket.com
www.onlinebankingsite.co.uk
Online Banking
Internet bank accounts work in the same way as high street branches except that you access them through your computer instead. Having an online bank account can be extremely useful. Firstly, it allows you to set up direct debits on bills and other commitments so that they are paid automatically (so you can’t forget!) and it also allows you to see where you are up to with your money at the click of a button.
If you choose to use online banking, it is important to be aware of scams that try to obtain your security details. The fastest growing scam is Phishing: fake emails that appear to be from a legitimate source and trick the recipient into releasing their security details. Tell-tale signs include:
• A general greeting that doesn’t identify you by name
• Incorrect spellings and random capital letters and punctuation
• Offering fake reasons for inputting your data such as asking you to ‘verify’ you account details
To avoid phishing scams:
• Don’t follow links from emails that ask for security details
• Install anti-virus software that includes an anti-phishing program
• Never give away your security details
Example of a phishing email.
Overdrafts
Banks will often allow you to go overdrawn on your current account. If you have arranged for an overdraft facility on your account, you will be charged an authorised overdraft rate. If you have not arranged an overdraft facility or exceed your authorised limit you will be charged interest at the unauthorised overdraft rate.
If you think your financial needs are going to be higher than the overdraft you have been given, it is vital that you contact your bank.
Debit cards
A debit card is a payment card which is linked to your bank account and allows purchases to be deducted from your balance (this can happen on the day of purchase itself). Debit cards also enable you to obtain cash from cash machines. If you use a debit card, you must be careful not to spend more money than is in your account.
Credit cards
Credit cards can be very handy but, if you do use one, be sure that you can pay the bill off in full each month. It is so easy to run up a significant debt with your credit card (with interest being charged at around 19%+) and then be unable to repay it, so be very careful. It can be useful to use a credit card for some purchases to help build up a good credit rating, but only do this when you know you will be able to pay the full bill off.
Store Cards - a ‘wealth’ warning
Store cards work very much like credit cards, except that while credit cards can be used anywhere, store cards can only be used in a specific store or store group and they are much more expensive. The annual percentage rate (APR) on the average store credit card stands at 24.30%, which is 7.58% higher than the average credit card rate of 16.72%. Stores tempt people into signing up by offering a 10% introductory discount. As tempting as it may seem to take advantage of a small discount on your initial purchases, unless you intend to pay back the balance in full, store credit cards are an expensive luxury you’d be better off without.
Debt
Young people are particularly vulnerable to debt; unemployment and low pay is a major factor as well as tempting offers such as 0% finance on goods purchased, and discounts offered by storecards. Many Citizens Advice Bureaux and benefits advice centres employ debt counsellors and money advisers. If you are having problems with money and would like to talk to someone there is a National Debtline (the number is listed below) as well as a range of local services.
It is important to address your money problems early. Letting things get out of hand makes it harder to put everything right.
Contacting a debt adviser through your bank if you have multiple debts may not be the best option. It is best to seek independent advice. An independent adviser will be able to review your finances and see if there is anything you can do to manage your money better.
Also contact the organisations that you are having difficulty paying. This may be utility companies such as water, electricity or gas. Each of these companies will have payment plans that you can do to help you spread the cost of paying bills. Credit card companies may also be able to help you if you can’t make the minimum monthly payment.
For more information visit:
www.debtquestions.co.uk
www.insolvencyhelpline.co.uk
www.nationaldebtline.co.uk
www.cccs.co.uk
Planning for the future
Savings
We live in an uncertain world where jobs are easy to lose and incomes are fragile so it is important to save as much as you can afford. If you can, try and save some money each month as a general savings plan or to cover emergencies when they arise.
There are many different types of savings accounts, not all will be the right type for you. Savings accounts most commonly fall into one of the five types of accounts listed below:
• Easy Access/ No Notice Accounts
• Notice Accounts
• Bonds or Term Accounts
• Regular Saving Accounts
• Tax-Free Accounts
Pensions
The earlier you start saving into a pension, the bigger the pension you should end up with. Likewise the later you start the more you will have to save to achieve the required retirement income.
The basic state pension for a single person is £66.75 per week and £106.70 for a married couple so you should begin to think about your pension as soon as you start working. It is generally recommendeded you save at least 10%-15% of your income to achieve a more comfortable retirement.
Pensions come in all sorts of different ‘packages’ and you should speak to a financial adviser for information on which one would suit you best. Your employer may also provide a scheme for all employees.
For more information visit:
Department for Work and Pensions: www.dwp.gov.uk
Pension Service: www.pensions.gov.uk
Pensions Guide: www.pensionsguide.gov.uk
Pension Advisory Service: www.opas.org.uk
Insurance
Insurance allows someone who suffers a loss or accident to be compensated for the effects of their misfortune. It lets you protect yourself against everyday risks to your health, home and financial situation.
There are many different types of insurance and you are unlikely to need every single one of these, so read around, choose carefully and remember to read the small print. www.moneysavingexpert.com is a great site to visit to see the best insurance deals around.
If you are a wheelchair user it is a good idea to make sure your chair is insured. This can sometimes be done through your house insurance or you can approach an insurance broker that specilaises in insurance for disabled people.
Beware of being offered insurance that may not be necessary. Product Protection Insurance (PPI) is now nearly always offered on electrical goods such as IT hardware and white goods but it is very expensive. Many sales staff are given sales targets to reach with this type of insurance so they can be pushy and try to make you take the insurance but very often, you will not need it.
If you are having trouble getting insurance, contact the ASBAH helpline on 0845 450 7755, they will be able to suggest insurers that have experience in helping people with disabilities.
For more information visit:
www.moneysavingexpert.com
www.enrouteinsurance.co.uk
www.direct.gov.uk
Resources
Money made clear: Straightforward advice from the Financial Services Authority, including staying safe from scams and tips on how to make the most of your money.
www.moneymadeclear.fsa.gov.uk
Citizens Advice Bureau: The online CAB service provides independent advice on benefits and housing, employment rights and discrimination and debt and tax issues. It also has a wide selection of fact sheets you can print off.
www.adviceguide.org.uk
Credit Action: Credit Action is a national money education charity and website which offers easy to understand information and advice about money management.
www.creditaction.org.uk
tel: 0207 436 9937
email: office@creditaction.org.uk
Consumer Credit Counselling Service (CCCS): A specialist free debt advisory service, with a free telephone helpline.
www.cccs.co.uk
tel: 0800 138 111
email: contactus@cccs.co.uk
Disabled Living Foundation: The Disabled Living Foundation (DLF) is a national charity that provides free, impartial advice about all types of disability equipment and mobility products for older and disabled people, their carers and families.
www.dlf.org.uk
tel: 0845 130 9177
email: advice@dlf.org.uk
Financial Services Authority (FSA): The website includes consumer help, comparisons for financial products, financial planning advice, personal budget calculator and quiz, useful section on credit and debt, leaflets and factsheets, service to find out if a financial service is a regulated, approved service, teaching and learning resources for parents, teachers and adults.
www.fsa.gov.uk
tel: 0845 606 1234
Money Saving Expert: Detailed advice and information on a wide rage of ways to save money including travel, savings accounts and utility suppliers.
www.moneysavingexpert.com
Money Unlimited: General advice on finance including savings and issues for all ages, including a section on ethical money, and comparison tables, from the Guardian newspaper.
www.moneyunlimited.co.uk
National Debtline: Providing free confidential and independent advice and support to people in debt in England, Wales, Scotland and Northern Ireland to national standard level. Site includes information pack, repayment calculator and personal budget sheet, sample letters, FAQs, debt advice (England and Wales, Scotland) and factsheets.
www.nationaldebtline.co.uk
tel: 0808 808 4000
email: advice@nationaldebtline.co.uk
National Centre for Independent Living: designed to be a resource on independent living, direct payments and individual budgets for disabled people and others working in the field who may find it useful.
www.ncil.org.uk
tel: 0207 587 1663
email: info@ncil.org.uk
Office of Fair Trading: Consumer information and business information, also market studies, news and information.
www.oft.gov.uk
tel: 08454 04 05 06
email: enquiries@oft.gsi.gov.uk
Onlinebankingsite: the Internet allows 24 hours a day, 7 days a week banking, and online banking is going to continue to grow. With all banks after your business you can use this online guide to help you choose the online banks that give you the best deals.
www.onlinebankingsite.co.uk
TheSite: General advice on finance, including advice on what to do if you are in debt, useful information and advice if you are refused credit and money management. You can search for local advice centres.
www.thesite.org
Your Money or Your Life: A Practical Guide to Solving Your Financial Problems and Affording a Life You’ll Love by Alvin Hall
A book full of practical advice, tools and tips to solving money problems. It details the basics of dealing with debt, savings, investments and pensions. It also contains quizzes and worksheets.
To order the book, visit www.amazon.co.uk
