It prevents you from spending more money than you make. This is possible for the very reason we dread checking our statements: it shows you how much money you have lost.

However, budgeting provides a positive approach. With a budget you can identify your spending habits. You can take control and manage your expenditure by observing why and when you are spending more than you should, and pursue a target for how much you should be spending each month.

The goal is to create a budget that allows you to live normally and to save more.

Drawing up a budget needn’t be hard; however, you do need to prepare a few things beforehand. To begin with, you should have kept all your financial statements from the previous year and begin saving the ones for this year.

Separate these records into expenses and income and then divide them up for each month.

Expenses

Your expenses should be divided into two categories:

• the monthly contracts and bills
• the day to day and occasional purchase.

The contracts and bills you need to pay rarely vary in price; for example, your rent. Include anything that you MUST PAY regularly. This total should remain at a steady rate. The benefit of observing this steady rate is to note any changes and how they will affect your budget for the year.

A question you need to bear in mind for changes to your ‘fixed’ payments is, ‘how much, by the end of the year, will this have amounted to?’ An extra pound on an existing contract may not sound much per month, but it may affect the targets for the rest of your budget.

Some ideas: Mortgage/Rent, Council Tax, Electricity, Gas/Water, phone/ Internet, Loan/Card, NI, Pensions, Savings/Investments, Insurance, TV licence/ Satellite.

Day to day costs and the occasional purchase refer to both the things you need to purchase every day and those that you buy infrequently. The total cost for these items will be irregular. However, you can budget for a ‘weekly shop’ by setting a limit on how much you want to spend on food each week.

A more detailed budget would highlight the amount of money you tend to spend on food as, although it is a day to day purchase, it is essential to you and will cost the most.

A budget in this area will help highlight the amount you spend on certain inessential items; for example, some of us have a habit of buying more clothes than we need. Common habits like this will be put into perspective with a budget.

Some ideas: food, alcohol/cigarettes, holidays, petrol, pets, shopping (e.g. clothes, toiletries), repairs, travel (taxis, bus, train), emergencies,

Income

This encompasses every bit of money that you expect to receive; taxed or not.

Income: pay after tax, benefits (state, child, disability), interest/investment income

Adding it all up to take it away

Once you have the information you need, it is simply a matter of subtracting your expenses from your income for each month.

Your leanest month should act as the ‘control’. This month’s expenses should be the target for you to achieve in terms of expense vs. income, and the difference between this month and the most expensive should be the amount you save each month.

If you find that your expenses are higher than your income you should immediately look for ways to close this gap. Start by questioning what has caused this and how this month differs from a cheaper one. You may not be able to save money on the essential household bills, however you may be able to negoitate with your current suppliers (gas, electricity, internet) or find a competitive rate elsewhere. Companies are also hit by the recession and will offer competitive rates as it is an effective way to make up volume.  It is more likely that your shortfall is a result of spending more on items on your day to day or occasional purchases expenses.

Ultimately, you can begin the year with a firm understanding of where you stand and how to improve your financial position.

In the aftermath I hope you weren’t compelled to buy anything unnecessary in the belief that it’ll never be cheaper, or perhaps to the extreme of stockpiling ‘essentials’!

So, what to do now the VAT is at 20%? A rise in 2.5% may not seem like much, but it is still prudent to watch what you are spending your money on, especially on items you frequently buy, for example the everyday ‘essentials’.

What do you consider to be essential? Is it the same definition the tax man uses?

Items deemed ‘essential’ are exempt from the VAT increase and those that are classified as ‘luxury’ are not, and a few are under the reduced rate of VAT.

Till February 1, the government have allowed stores to apply the 20% charge to the total cost of products at the checkout, rather than on the shelf label.

Bearing this in mind, you should be aware of what your products are classified as and adjust your shopping habits appropriately.

According to HMRC, unprocessed foods will have a zero rating, this includes the food groups: raw meat and fish, vegetables and fruit, cereals, nuts and pulses and culinary herbs.

There are also peculiar distinctions which mean that items like tortilla chips have a zero rating, yet crisps incur the full VAT tariff.

To see what has been affected by the VAT increase click through to the  HMRC webpage.

For the majority of you it means ‘getting fitter’ or ‘losing weight’.

In our laziness we often turn to the obvious ‘solution’: the gym. This explains why gyms tend to be at full capacity at the start of the year. Paying monthly to share the equipment in a crowded gym may not be the fast-track to a fitter you, but to a broken resolution and at a hefty cost.

There are other ‘solutions’ to consider as well as this one.

Is the gym the only way?

If you are adamant the gym is the only place to go for fitness, the questions you need to ask are:

When are you likely to go?

This is the quickest way to lose money and motivation. How do your working hours affect when you can go and for how long?

New members often sign up to monthly contracts and yet find themselves strangers to their own gym. Remember you are paying even while you are not using it. You may find that a pay-as-you-go approach is the most cost effective plan.

People are likely to visit the gym after work – it is the most reasonable solution for those that work far from home and do not have a gym at their work place. Therefore, it is likely you will encounter these people at the gym at approximately the same hour. Imagine all of you in the gym, at the same time, trying to use the same equipment -it doesn’t justify the cost.

It is important that you visit the gym and consider its location. Ask for a tour after you finish work –the time you are most likely to go to the gym. This will give you an idea of how full it will be, along with, of course, seeing what you’ll be getting for the cost.

If you have the day off from work or the kids, bear in mind the off peak hours at the gym are cheaper.

Where are you likely to go?

Where is the ideal place for the gym? Should it be  closer to home or to work? People working in the city can expect to pay expensive fees for the pleasure of a convenient gym. However, this might be offset by concessions made available to your company by gyms in the area.  If you are looking for a gym closer to home then perhaps the leisure centres provided by your local council are a cheaper option.

How long will you go for?

How long is your contract? Do they offer short term contracts? You should always read the contract before signing, and not just for the fees. Consider the cost over the months and not for just for how much you are paying each month, this will give you an idea of how much you are going to spend and whether this is right for you.

The reasoning, “I’ve paid for it so I’ll have to use it” does not hold if you don’t have the time or the energy. Again, perhaps you need to go a few times before committing to something a lot longer and more costly.

What do you want?

Ultimately, what do you need? This may sound obvious, but gyms are capable of offering you an array of things you may not actually need. So, do you need or want a personal trainer? Are you training for a specific purpose: to run a marathon or to bulk up? If you are then you need that cross trainer or the bench press that holds 200kg.

Another way to look at the gym is to realize you are paying for everything that you see. So, what is essential?

Alternatives

Local leisure centres.

The gyms in the sports centres offered by your local council are often cheaper than the private and more prominent gym chains. They offer concessions to students, the elderly and the unemployed. You can easily check on your local borough’s website for details, or visit your town hall for information.

By becoming a member of the gym you are likely to have access to the other facilities in the sports centre, and a membership there may entitle you to other activities occurring within the centre – a great way to socialize within your community.

The scope of your fitness regime may be significantly broadened by the availability of facilities such as the swimming pool and the versatile indoor courts that offer a way to enjoy team sports with your friends while not having to endure winter temperatures!

Alternatively, as with a few of the private gyms, you can opt to pay for each visit.

The great outdoors

January may not feel like the month to train outdoors, but training in the cold can be an invigorating experience and a better reason to train harder! Team sports like football are great for taking your attention away from the weather. However, it is vital you warm up well and dress appropriately.

Armchair athlete.

If you have the space indoors and the neighbours aren’t concerned about the noise, you can train at home. There are many ideas online for exercising at home, some requiring little to no extra equipment. Youtube is an excellent resource for tutorials, with many people often posting entire courses in personal fitness for free.

Work out gear

If you’re a runner you’ll be relieved to know cheaper shoes are better for you.

Running barefoot is the way we were meant to run. It encourages you to strike the ground on the balls of your feet, as opposed to the jarring ‘heel-strike’ of the modern shoe wearing runner.

While this may be the cheapest option, and arguably, the best for our bodies, it is understandable that running barefoot through the city or on a used treadmill is less than desirable.

Alternatively,  a stripped down and simpler shoe sole is the closest alternative to running barefoot and, due to the lack of padding and expensive add-ons, the cheapest.

mySupermarket is a grocery shopping and comparison site that allows you to compare and shop from four supermarkets in one central place.

Their aim is to help you get the best possible price for your supermarket trolley while enjoying an easier and more consumer-friendly shopping experience.

They are 100% independent from the four supermarkets featured on the site and do not receive any fee for transferring an order to them. None of the supermarkets or product manufacturers own a stake in the company. When comparing between supermarkets, their only agenda is ensuring that shoppers get the best value possible.

The mySupermarket service is based on pricing information which is updated daily.

Click Here to go to mySuperMarket Website.

1 How many times have you spent good money on children to watch them throw the toy to one side and play with the box. Todlers have a great imagination, so help them exercise it. Get some boxes from the local supermarket and spend the afternoon making things, then they can spend the next few days playing in / with them. How about turning a box into a car, a bus, an aeroplane or a rocket ship? You can also fill old water bottles with rice to make a shaker, but make sure the cap is securely tightened.

2 Whatson4littleones.co.uk lists over 12,000 activities for babies and pre-school children activities range from playtime sessions at Early Learning Centre stores to story-telling groups. You can also get details of classes that offer a first lesson free if you want to try out an activity before you buy.

3 Why not join a toy library. They provide a constant supply of new toys (hired for up to 50p per item) and they often hold play sessions. You can visit www.natll.org.uk or if you prefer just telephone 020 7255 4600 .

4 If the weather is nice then just taking the children to the local park or garden centres can be great fun, better still there are often other children which helps develop their social skills and gives you the chance for a bit of adult company. Why not go to the pet shop (you don’t have to buy) young children can get as much excitement there as a safari park.

5 If you have not done so already then why not visit kidsgofree.com for ideas for fun days out on the cheap. Whilst it will not be completely free you can save a good amount of money due to the kids going for free.