Working out your outgoings This part of the budget shows you how much you spend on your essential living costs. Do not include payments towards any arrears in your outgoings. You will be asked about these at the end of Your full budget. What are ‘arrears’? We use ‘arrears’ to describe payments that you have missed on your debts and household bills. Arrears can also include interest and charges that have been added. It is important to be as accurate as possible, so that you know how much you need for your living costs. This also affects what you have left to pay towards your debts. The budget splits your monthly outgoings into two groups: fixed costs and flexible costs. Many of your fixed costs will be based on your regular bills, such as council tax and water. Your flexible costs generally cover outgoings that vary from month to month, such as food and housekeeping costs. Some costs you will have little control over and others will depend on your circumstances. Make sure that the figures in your budget show how much you actually spend. If they don’t, it will be difficult to keep to your budget. Remember to include small purchases, those you use cash for and things you need to buy now and then, such as new tyres. These costs add up and can easily be overlooked. Don’t be tempted to include less than you are really spending, as this will make it difficult to keep to your budget. For example, we often find that people underestimate how much they spend on gifts, so take a few minutes to work out your actual costs. Work out your average monthly spending on gifts Step 1: write down everyone you buy a gift for over a year and the amount you usually spend. Include the cost of cards and gift paper. Step 2: add up all of the costs from Step 1. This is your yearly cost. Step 3: divide the total from Step 2 by 12. This is your average monthly spending on gifts. Page 20