Managing money

The money coming into your household can come from different places – work or benefits, or a combination of the two. If you have reached retirement age, the Government may pay you a pension. This is to cover the basic cost of living if you have made sufficient National Insurance contributions during your working life. If you would like to learn more about your State Pension, including a forecast of what you might expect, you may find this website helpful: www.direct.gov.uk/en/Pensionsandretirementplanning/index.htm or telephone 0845 7 31 32 33 and ask for a leaflet to be sent to you.

Quick links to:

• Where your money goes
• How to look after your money
• John keeps track of his money - example explained
• Keeping track
• This is what John’s ‘Keeping Track of Your Money Pad’ looks like

Where your money goes

Almost everybody wonders where their money ends up going and it’s easy to see why, because it gets used for a lot of different things.

Housing and household expenses

As adults, we usually spend money on keeping a roof over our heads. We may be buying our own home, which usually means we pay some money every month towards the cost of this purchase (a mortgage). Otherwise we rent. This means that the home we live in doesn’t belong to us but we pay money (rent) to the owner so that we can live there (this may be the council, a housing association or private landlord).

Living expenses

Our money also goes on things like buying food and clothes and paying for telephone and television bills. We also need it to travel about, whether that means buying bus or train tickets or running a car. And of course we all like having a bit of money to spend on having fun.

Savings

If you do not have much money left at the end of the month, then you may want to start to save some on a regular basis. By doing this, you’ll build up a pot of money that you can spend on something special or just put by for a rainy day.

Ways to boost your household budget

Wherever and however you live, running a home is expensive. Here are some general tips that can help you reduce the costs and keep control of your budget.

• Claim all the benefits and tax allowances that you are entitled to. Your local Jobcentre Plus can help with this. There is also an online ‘benefits adviser’ service which can answer your questions anonymously about your savings, income and outgoings, to get benefit advice, for you/your family or for someone else. You can access this from: www.direct.gov.uk/en/Diol1/DoItOnline/DoItOnlineByCategory/DG_172666

• Shop around for services such as gas, electricity and telephones. The companies providing these services compete with each other to give good deals to customers, so you may find you can save money by ‘switching’. Your local library should have Internet access (this may be free) and there is a growing number of websites that can help make it easy for you to check if you are paying too much for your services and ensure you get the best deal on most of your purchases.

• You can also cut bills by switching to low-energy light bulbs and by turning off appliances such as TVs and DVD players rather than leaving them on standby. Also, unplug mobile phone and other chargers from the power supply. If you leave the charger plugged into the socket but not connected to the phone etc, it will still consume some energy; consequently, energy is being wasted which soon mounts up.

• You can’t switch water providers, but you may want to consider having a water meter installed to help reduce your bills. However, the saving will depend on the amount of water you use. Check with your local water company to see if this is a good decision for you. They should install a meter for free, allowing customers to switch back to the unmetered charge any time within 12 months of installation of the meter if they are unhappy with the change. If a meter cannot be fitted, companies may offer an alternative unmeasured tariff which may be lower than your tariff charge.

• Before you go food shopping, make a shopping list and stick to it. If you do see special offers or buy-one-get-one-free deals, make sure you don’t buy more than you need and end up wasting food. It’s also a good idea to look out for cheaper brands, such as a supermarket’s own brand, which can help you save money. Remember that ready-made meals and takeaways are usually more expensive than cooking from scratch.

• Try to give up smoking! 20-a-day costs £2,000 a year.

• Self-employment can bring in extra cash and be rewarding, but seek advice first to ensure you know what you should do about Income Tax and National Insurance. Working for yourself might also affect your entitlement to benefits. Let’s Talk About Self-employment is a useful resource: www.letstalkaboutselfemployment.org.uk

Tax

If you’re earning wages, you have to pay Income Tax, which means some of the money you earn goes straight to the Government. It is usually taken out of your wages before you receive them. There are also other taxes that we have to pay, such as council tax, which is a local tax that helps pay for things like our schools, rubbish collection and police service. Most of us have to pay some sort of tax. It’s an offence not to pay what we owe so it’s a good idea to take some time to find out more about taxes.

Most of us have heard stories about people stashing their money under the floorboards or in their mattresses but there are usually better and safer places to keep money.

Bank and building society accounts

The most common way to manage your money is to put it in a bank or building society. They’ll open an account for you to keep your money in and you’ll be able to get your wages or benefits paid straight into the account as well. When you need to spend your money, you can get it out of the bank as cash or organise for the bank to pay bills by direct debit for you, which may mean you pay less for some things like gas and electricity. This is a growing practice, so do ask when dealing with new service companies.

Basic bank or building society accounts

There are lots of different sorts of accounts, and it can be very confusing working out which sort is right for you. Banks and building societies have rules about what sort of account they will let you open.

Basic accounts are a good starting point (you may be able to open a basic bank account whilst you are in prison). These are designed for people who have problems opening other accounts. This can happen because of a bad record of repaying loans or just because of a low income.
With a basic account, you get a cash card to withdraw money, but you can only take out as much money as you have in your account.

(Banks are starting to replace Electron, Maestro and Solo cards with a Visa Debit card, which you will receive when your account is open, and which should enable you to spend your money in shops. Some shops do not take Electron or Solo cards; however, you can use the card for telephone purchases or on the Internet without having to take out cash.)

You can only spend as much money as you have so you won’t end up with debts. You’ll also be able to set up direct debits and standing orders, which let you pay things like bills straight from your account.

As an ex-offender, you can contact any bank or building society. Banks are required by law to make sure that you are who you say you are so you’ll need to take along some sort of personal identification. This can be:

• with a photograph – such as a valid passport or new style driving licence; or
• without a photograph – such as a valid old-style driving licence – plus another document like a benefit book.

You’ll also need to take along proof of where you live. Most banks accept:

• a utility bill in your name such as gas, electricity or water that is less than three months old; or
• a letter from your landlord or probation office confirming your address.

Letter of Authority

If you already have a bank account and are going away for a while, it’s a good idea to get someone close to you to sign what’s called a Letter of Authority. This means that they can get access to your account, perhaps to withdraw money you have left for them or to look after your account so things like new plastic cards (debit and credit cards) and statements don’t get sent to your old address. Ask your bank or building society for advice on this.

John keeps track of his money - example explained

In the example below, the money coming in on the 30th is £110 from John’s job, but on the same day he had to buy a bus pass, which cost £25. This amount has to be deducted from the £110, leaving £85 to spend.

John spent £50 on food and necessities at the local supermarket, which needs to be taken away from the £85, leaving him with £35. His mobile phone needed a ‘top-up’ so he spent £10 on this, leaving him with £25, which he doesn’t spend that week.

John again earns £110 the next week, which he adds to the £25 left from last week, which makes £135. John knows that his electricity bill needs paying and also his phone will need topping up again, and of course he needs to eat so he takes these amounts off what he has to spend. Straight away John can begin to see where his money is going. He knows what he can afford and because he has made a list of all his outgoings and when they are due he can plan to have money to cover this to avoid debt. If he can save a little each week, he will have a small nest-egg for emergencies or special occasions.

So, week by week he keeps track of money coming in and money going out using this pad.

It often feels as if our money just vanishes so it’s a good idea to learn to keep track of it. The best way to start to do this is to work out how much money we have coming in. This tells us how much we have to spend, which is often called our budget. With a budget, the idea is that you don’t spend more money than you have, so if you have £110 coming in each week, this is the most you can spend in a week.

Have a go at working out your budget by printing and then filling in the ‘Keeping Track of Your Money (PDF)’ pad. Make a list of your ‘outgoings’ and add up the total cost. If the total of your ‘outgoings’ is more than your income, you will need to think about how you can reduce your ‘outgoings’ or increase your ‘income’. Look at the section on ‘Ways to boost your household budget’ for some more help.

Your ‘outgoings’

Outgoings might include:

• Council Tax
• Food
• Rent or mortgage
• Electricity and/or gas
• Work costs (travel/lunches)
• Water rates
  
• Telephone
• Clothing
• Transport
• Insurance
• Going out/leisure

If you have any other expenses such as maintenance payments or loans, remember to include these as well.

There is also an Interactive budgeter on:
www.moneymatterstome.co.uk/Interactive-tools/Budgeter.htm

This is what John’s ‘Keeping Track of Your Money Pad’ looks like