However, these same people are signing themselves up to an impossible balancing act every month, as they desperately try to stretch the last of their money to get them to payday. And life really doesn't have to be this stressful. There are ten easy steps anybody can take which will bring their budget back under control.
We've teamed up with NatWest, who's Clear Rate Credit Card has one low rate on balance transfers and purchases, so you know where you stand and one straightforward annual fee, 11.1% APR (variable), to give helpful tips on getting your money under control
1. Dig out your paperwork
Before you start, get your hands on all your bank and credit card statements for the past year, plus your monthly bills. This may seem like a bit of a headache, but you'll need them as you go along, and you don't want to give yourself any excuse to stop this process once you've started.
Look at your income from wages, savings, investments, pensions and any benefits you receive. Check your wage slips and bank statements so you have an accurate idea of all your income in one place.
3. Then calculate your regular outgoings
This can seem like a daunting task. However, budgeting tools like the NatWest budget calculator can be really useful. It breaks down your expenses into various categories, including home, food, clothes and supplies, utility bills, travel, debt repayments, family, entertainment and any savings. Don't guess how much you spend, look through your bills and statements, so you can be sure you're getting an accurate idea rather than basing your budget on guesswork. Take your time so you can be sure that you've included all your regular spending.
4. Next look at more long-term spending
Here you need to look at things that come up less frequently. There are annual expenses like Christmas and birthday presents, holidays, car tax, and insurance. Then there are things which come up several times a year - like home and car maintenance. Finally, there are the very expensive things that come up less often but need to be saved for as you go along - such as a new car or computer. You need to work out a monthly cost for each of these things, so that if you know you need to spend £6,000 on a car every five years, you know you need to put aside £100 a month to pay for it.
5. Subtract your expenses from your income
This is usually the stressful bit, because often after all your hard work, you discover that your income isn't enough to cover your outgoings - which explains the monthly squeeze. However, you need to know what your shortfall is so that you can squeeze your budget more sensibly.
6. Shop around
By far the easiest way to cut your costs is to shop around for your utilities, insurances, and borrowing. Then look at your mobile phone, landline and TV packages. There are online price comparison websites which will let you shop around without the legwork. In many cases you can shave hundreds of pounds off your annual costs through this process, bringing the budget back into the black.
7. Take a harsh look at your spending
If you have more to cut out of your budget, you need to think carefully about how you spend. If you have put aside a certain amount for new clothes, think whether you really need to update your wardrobe so often. If you have an expensive TV package, or an allowance for going out regularly, consider whether these things really are essential, or whether there are cheaper alternatives. Don't be so strict that you fall off the budgeting wagon in weeks, but think twice about every penny you spend.
8. Consider your income
If there's still a shortfall and you cannot cut your costs any further, look at your income. Can you increase the hours you work, or make money from things you do in your spare time? Do you qualify for benefits or tax credits that you don't claim. There are two sides to your budget and the income side shouldn't be neglected.
9. Keep coming back to your budget
If you go a couple of months into life on a budget and find there are some areas where you are consistently overspending, don't just give up, go back to the budget and think about where you can cut your costs. No-one gets this right first time, so it doesn't have to mean all your hard work is for nothing.
10. Have a safety net
In an ideal world this will mean that you always have enough money to last to the end of the month, but you need a contingency plan too. If, for example, you have unexpected repairs or maintenance to your house or car, it would be useful to have something in place so you don't end up borrowing money without fully considering the cost.
The NatWest Clear Rate credit card charges a low 6.9% p.a. (variable) on purchases and balance transfers, no balance transfer fees, just a single annual fee of £24, which helps you see clearly exactly where you stand. The card isn't designed with attention-grabbing introductory offers, so there are no nasty surprises when a 0% period runs out and no need to move around to avoid higher charges after a 0% period. You'll need to factor in the cost of the fee.
Representative example: Representative 11.1% APR (variable) based on an assumed Credit Limit of £1,200. Standard interest rate for purchases: 6.9% (variable). Annual fee: £24.
Your actual credit limit and the interest rates you receive will depend on our credit assessment of you and the interest rate could be up to 14.9% p.a. (variable). The APR you'll receive will be based on your interest rate and credit limit and will take in to account the annual fee, so may be higher than Representative 11.1% APR (variable) which also takes in to account the annual fee.
To apply you need to be aged 18 or over, a UK resident and earn at least £10,000.
Visit NatWest for further details.