The management and allocation of scarce resources is the basic economic problem that has bedevilled individuals and policy makers since the beginning of time. This is often reflected in that feeling of, there’s lots more days left than money, soon after pay day. This is not just a challenge at levels of low income, as it is often said, ‘the more money we have, the more problems we get’.

Some of our SE21/SE22 readers were recently presented with this allocation of resources problem as follows, how to manage on a budget? Two respondents, were only keen to share their experiences with us.

Alison, a retail assistant working in Dulwich, with an 18 year old daughter in full-time education, said, “my rent and council tax swallows up the lion share of my wages, so I am forced to manage my money very carefully. Several years ago, I got into a nasty mess, so now I keep a meticulous record of all my direct debits leaving my bank account. Writing down my direct debits helps me stay in control of my finances. I don’t want to go back to that mess again.”

Despite the financial challenges and the prospects for the future not looking much brighter according to Alison, she was very upbeat and radiating our missing summer glow. In addition she explained that her financial survival was being propped up by her bank overdraft.

“I try my best not to exceed my overdraft as it is a life saver. With an 18 year old in full-time education, cash is always tight. The cost of living seems to be forever increasing with most people, it seems we’re all in the same boat, whether single or two parent families.”

Vincent, an apprentice in SE21, living at home with his mother and sister said, “I help mum with the household bills, so I have to keep a watchful eye on my funds. To keep control of my money I manage three accounts: my current account which receives all my income and pays out all bills by standing order on pay day plus one. On the same day, I transfer a fixed sum to savings account number one. The remainder less £150 goes into savings account number two. The £150 in my current account is my monthly survival budget. My savings account number two is used for all my personal hygiene spending, such as dry cleaning.“

Our two readers stressed the importance of monitoring their bank accounts. This was reminiscent of those days in local government finance when it was a daily routine to identify the incoming and outgoing cash.

Alison said, “I keep a regular check on my bank statement to avoid any nasty surprises”. Vincent advised, “I receive a weekly text of my account balance from bank but I still check my balance daily as a back-up.”

Alison and Vincent provided the following tips for surviving on a budget:

  1. Keep a record of your money coming in and when it is due to go out;
  2. Review your spending pattern and rein it in otherwise, you’ll lose control;
  3. Eliminate unnecessary spending, such as chocolate;
  4. If you have an overdraft, do not go over your limit;
  5. Consider streamlining your social life expenditure.

Alison saved her best advice for last, “despite living on budget, it is important to try and maintain a good credit score, as this comes in handy to obtain finance for the luxuries.”

With such great local budgetary advice our new Chancellor may need to head south to get some tips as he plans to abandon the austerity boat.

David Frederick FCCA
Marcus Bishop Associates
Chartered Certified Accountants

This article first appeared in the August 2016 issue of SE22 magazine.