Budgeting

Do you know the actual amount of money you have spent this week? Down to the last penny? Probably not. Items bought with the small change in our pockets are often dismissed as being trivial expenditure when we try to make ends meet, and need to save some money.

Yet these small purchases - newspapers, magazines, chocolate bars, cups of coffee, a drink on the way home, for example - can add up to a significant amount of money across a year.

And do you know how much your debts are actually costing you? What the total amounts repayable are, compared to how much you borrowed? And are the interest rates payable on your debts competitive, because the higher the interest rate, the longer it will take you to clear your debts and become debt free?

A basic debt reduction solution would involve a combination of earning more, spending less, and modifying your lifestyle - at least in the short term - to release sufficient money to reduce and then eliminate your debts. If you don't work to a regularly updated budget; if you are relying solely on memory in dealing with all matters financial, you are surely going to lack the necessary knowledge to balance your spending to your income each month, and to clear your debts. Working to a budget is the only way you are going to find the best debt reduction solution for you.

• Why do I need a budget? How will it help me?
• How to create your own budget. We show you how.