Budgeting effectively while you’re on an IVA
You’ve taken the first step in taking control of your finances with the approval of your IVA. The next step is living to your budget, which you must do if your IVA is to successful.
Putting your budget down on paper is the easy bit. However, sticking to it can be a challenge.
Budgeting allows you to cover all of your essential costs without overspending meaning your individual voluntary arrangement is more likely to be a success.
Keep a keen eye on your finances
In addition to managing your monthly household expenses, it’s important to budget for one-off annual expenses, such as road tax or insurance.
Your budget allows for you to put money for one-off annual expenses aside during your IVA. One way to do this is to organise each item of your expenditure into one of three simple categories:
- Regular payments (mortgage/rent, council tax, gas, electric, your IVA payment)
- Everyday expenses (food, toiletries, petrol)
- Expected one off costs/emergencies (repairs, clothes, MOT etc)
Open a separate basic bank account for your one-off annual expenses and set up a regular transfer to it. Or if you prefer, you can put the money aside in a jar for easy access once payment is due.
Keep on top of regular payments with Direct Debits
It’s useful to set up Direct Debits for your priority bills, to come out the same day you get paid. This will help you avoid spending this money.
It’s worth reviewing these regular payments to see if you can make savings by switching energy suppliers. Comparison sites that offer an OFGEM approved switching service can help you find out if you’d be better off switching to another provider.
You can also review your TV, internet and phone packages to see if you’re paying for services you don’t use.
It’s also worth bearing in mind that things like food shopping, sports, hobbies, petrol can vary a lot. Make sure you stick to the amount in your budget by working out how much you have to spend each week.
Keeping a spending diary to track how much you’ve spent every day or week can also help. It’s harder to track everyday spending when using your debit card so try and use cash for these