The first step to regaining control of your finances is understanding what you have coming in and going out each month. It is amazing how many people do not have a good understanding of these simple facts and then wonder why they can never seem to keep their money under control.

Monthly v Weekly
When you are looking at your financial situaion, it is normal to look at your income and expenditure on a monthly basis. Many people do receive their wages on a weekly basis and there are payments that we also make weekly – for example the weekly shopping.

However, most regular bills and debt repayments happen monthly. Therefore it is useful to think about income and outgoings over a month when trying to get your finances under control.

You will be able to better understand your income and outgoings by following the simple steps listed below.

Step 1: Add up your total income after tax

To understand your total household income each month, you need to add up all the income coming into the home each month. This may include money from wages after tax, pensions and benefits.

If you receive any of your income weekly (for example you receive weekly wages), then take your net pay (after tax) and multiply this by 4.33 – this will give you the monthly amount.

Include all other income like child benefit, tax credits, etc. If you earn overtime or commissions, you should really only include what is sustainable over the longer term. For example, take a sensible average of what you earned in the last 3 – 6 months. That way you will not include an income that is too high and un-realistic.

Step 2: Calculate your essential monthly outgoings

List everything you spend each month. Include Rent, Mortgage, Food shopping, Electricity / Gas, Car HP, Car running expenses, Childminding, School costs etc.

Some of your outgoings will happen on a weekly basis such as food shopping or fuel meters. If this is the case, simply take the amount you pay each week and times this by 4.33 – this will give you the monthly amount.

Equally, some of your outgoing may not be so regular – for example you may pay a water bill every 6 months or pay for car insurance once a year. If this is the case, divide the annual cost by 12 to get an average cost per month which you can add to the monthly outgoings.

What expenses not to include:

Do not include payments to unsecured creditors such as credit cards, store cards, and personal loans at this stage. The reason for this is that it is useful to look at these types of expenditures separately so you get a good understanding of the debt you owe.

Your next task is to calculate your disposable income.