How to budget for a monthly benefit payment

Money Advice Service

Feeling out of control when it comes to money can be scary, especially if you don’t know whether you’ve got enough to live on. Getting a single monthly Universal Credit payment might be making you even more nervous about keeping your head above water. The only way to manage your money is to draw up a household budget.

Why budget – why now?

Living in Northern Ireland or Scotland?

In Northern Ireland, Universal Credit works differently. Find out more on the nidirect website.

In Scotland, you might be offered some choices about how your Universal Credit is paid. Read our guide to Universal Credit in Scotland.

Drawing up a budget of all your household income and outgoings is a must if you want to make sure you can pay all your bills and manage until the end of the month.

Even if you’re already budgeting, changes to the benefit system will probably mean you need to make some changes to the way you go about it.

Just to remind you, the following benefits are being phased out for people of working age and replaced with Universal Credit:

  • Income Support
  • Child Tax Credit
  • Housing Benefit
  • Working Tax Credit
  • Income-based Jobseekers Allowance
  • Income-related Employment and Support Allowance.

In England and Wales, Universal Credit will be paid in a single monthly payment to each household.

So if you currently work out your budget weekly or fortnightly, you’ll have to start looking at your incomings and outgoings across the whole month

And if you’re using different benefit payments to cover set expenses, you’ll need to get used to having a single payment to cover everything

Find out more in our guide Universal Credit explained.

Get an estimate of how much Universal Credit you’ll be entitled to – including how much better off you’ll be in work – with this calculator on the Policy in Practice website.

Drawing up your budget – where to start

Get personalised help to budget for monthly Universal Credit payments with our Money Manager tool.

Despite how daunting it might sound, a budget is just two lists:

  1. Money you have coming in (from things like your benefit payments and your salary if you’re working).
  2. Payments you make (such as your rent or mortgage, heating bills and insurance, as well as living expenses and regular and irregular spending).

How to work out your income

Did you know?

Four in five people who set a budget stick to it most of the time. Keeping to a budget gives you peace of mind and helps you to stay in control of your money.

Source: Money Advice Service research (2014)

  • Benefits: Look at the paperwork relating to any benefits and tax credits you get at the moment. Jot down the amounts you get. Make sure you make a note of whether these payments are weekly, fortnightly, four-weekly or monthly.
  • Wages: If you’re working, check your payslips and jot down your salary (after tax and other deductions).
  • Other income: If you have any other income coming in, for example from a pension or child maintenance from your ex-partner, write down the amounts and how often you get them.

Don’t worry if the money you have coming in changes from time to time.

The budget we’ll help you draw up will be easy to adjust without you having to start from scratch every time.

How to work out your outgoings

  • Household bills: Gather together all the bills you pay so you can see the exact amounts. If your rent is currently being paid for you, be prepared to start including this in your budget soon.
  • Living costs: The more exact you can be here, the better. For things like grocery shopping, it’s probably enough to look at how much you spend across a few weeks and work out an average. But for things like school uniform and other one-off costs, you’ll need to look at what you spend across the whole year and divide by 12 to get an average monthly amount.
  • Insurance and loan repayments: Track down anything you pay on a regular basis such as home insurance, catalogue payments and credit card payments and make a note of them.
  • Children and pets: This includes things like childcare, after-school clubs, and school trips. Some of these costs will be regular and others will be occasional so you’ll need to work out an average. If you have pets, add up everything you spend on their food, vets’ bills, etc.
  • Travel: If you have a car, make sure you include all the costs (including some like car tax – commonly known as road tax – that you only pay yearly or six monthly). If you use public transport, you’ll either need to include the cost of your season ticket or work out how much you spend on average per week or month.
  • Leisure: If you’re living on a low income, this probably feels like the most squeezed part of your budget, but remember to include one-off events like Christmas and birthdays so these are budgeted for too.

Budget Planner

Use our Budget planner tool to help you make better use of your finances!

Now you’ve gathered together all the paperwork and figures you need, the easiest thing to do is to put it all into our online budget planner.

It will take at least half an hour to fill it in but it’s worth it because:

  • you can put in figures for weekly or annual payments, for example, and it works out the monthly amounts for you
  • even if you don’t manage to get it all done in one sitting, you can save it and come back to it later
  • if things change, for example you get an extra shift at work or your gas bill goes up, you can go back in and make changes without having to do the whole thing again
  • as soon as you find out how much Universal Credit you’re going to get, you can put your monthly payment in and see how that affects your budget
  • all the figures you put in are confidential – we won’t be able to see them or share them with anyone – and we’ve no way of knowing who you are, even if you register with us.

What if your budget doesn’t balance?

If you’re spending more each month than you have coming in, the next step is to look more closely at where your money is going and where you can cut back.

You might be able to get a cheaper deal on your phone or TV package.

Or you might find you’re paying more than you need to for your gas and electricity.

One of the advantages of moving onto a monthly budget is you can often sign up for cheaper tariffs if you pay monthly by Direct Debit.

Tips for staying on track

Of course, drawing up your household budget is only the start.

Now you have to stick to it, which is easier said than done when prices are going up all the time and a one-off expense like a new pair of school shoes can threaten to derail it.

Read our Budgeting tips when you’re on a low-income to help you find ways to make your money go further each month

The important thing is you’ve taken the first step towards being in control of your money.

Now you know exactly where you stand. And even if things come along you haven’t budgeted for, you can go back into your budget, adjust it and work out a way to deal with it.

Read a transcript of this video

This article is provided by the Money Advice Service.

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Some important information about Rest Less Money

We want you to understand the positives, but also the limitations of using our site. We operate in a journalistic manner and therefore all information, guidance or suggestions provided are intended to be general in nature, and you should not rely on any of the information on the site in connection with the making of any financial decision.

When we set out to build Rest Less Money, we wanted to be a trusted place where you could find helpful information about financial matters affecting the over 50s. As a free to use resource, we try hard to provide the best information we can, but we cannot guarantee that we won’t occasionally make mistakes. So please note that you use the information on our site at your own risk, and we can’t accept liability if things go wrong.

Key things to remember when using Rest Less Money:

We do not offer financial advice – As a journalistic site, it’s important to know that we do not provide financial advice. You should always do your own research before choosing any financial product so that you can be certain it is right for you and your specific circumstances. If you are in any doubt, please seek professional financial advice from a regulated financial advisor.

No Liability – please note that you use the information on Rest Less Money at your own risk and we can’t accept liability for how you choose to use the information given on our site. We will often provide links to content or products and services available on other third-party websites. These are provided purely for your convenience and we cannot be held responsible for any content, or any of the products and services offered on any website that we link to.

 

Accuracy of Information – We try to make sure that all the information provided on Rest Less Money is correct at the time of publishing as we want it to be the most helpful resource possible. Sadly, we are not perfect however, and so we can make no guarantees as to the completeness, accuracy, adequacy or suitability of the information available on the site.
Whilst we work hard to try and provide accurate information, deals and prices can change, so whilst they may be correct at the time of writing, providers may subsequently decide to alter them later – so always double check first.

A final note on the Rest Less Community Forums – always remember that anyone can post their opinion on the Rest Less Community Forums, so it can be very different from our own opinion and may not be factual or well researched. Always be wary of any content posted on the forums and be sure to do your own research and due diligence on anything suggested. 

We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

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