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A large proportion of the population in the UK have, at some time or another, checked their bank account, or their credit card statement and been shocked at either how little money they have left in their account, or how much of a balance they have run up on their card over the course of the last month.

For many people, this is just an occasional occurrence which can be easily rectified, but for others, it may happen on a regular basis, which can often prompt individuals to take out a personal loan in order to see them through to the end of the month, or for the purpose of a debt consolidation loan, to repay more expensive loans and credit cards.

Taking out a personal loan in this manner can be a panic reaction to solving a financial problem and far from actually providing a realistic solution, another loan debt can actually make the situation worse within a couple of months or so, eventually leading to bad credit and loan arrears if left unmanaged.

The best way of avoiding the situation of being left short of cash before the end of the month and ending up with spiralling personal loan debt, possibly through expensive forms of credit such as doorstep loans or pay day loans, is to set a financial budget each month and be disciplined enough to stick to it.

This may seem all well and good and if it was so easy to manage finances, no one would ever be in debt or need a personal loan again. But with high inflation pushing up the cost of living all the time and low wage increases at the moment, it can be extremely difficult to manage the everyday bills and expenditure, let alone the unexpected bill, such as a car repair bill, for example.

No one ever said that it was easy to manage their monthly finances, particularly if they already have a number of personal loans and credit card bills to deal with, but by following a few simple rules and setting up a realistic budget, it is quite possible to avoid falling into a worse situation with finances and loan debt.

The first thing to do is to make a list of all your outgoings throughout the month. Include all your personal loans, home owner loan and credit cards as well as your regular monthly or quarterly bills, such as utilities and phone bill. You should make a note of how much you spend on food and clothing each month and how much you spend on luxuries like going out.

When making this list, you should be realistic and honest with yourself. If you underestimate, or play down how much you spend on certain items each month, you are only fooling yourself and your eventual budget plan will fail within the first couple of months.

Once it is completed, you may be surprised at just how many outgoings you have each month and it may well be possible to make instant savings by cutting out a few unnecessary items.

You should then prioritise your bills. Utility bills and home owner loan repayments must take top priority, along with things like insurance premiums, followed by unsecured loan and credit card repayments, although it could be possible to save money on most of these items simply by shopping around for a better deal, or taking out a debt consolidation loan at a cheap loan rate.

Other cutbacks can be made on non essential items such a gym and club membership, as well as things like eating out, or simply stopping off for a cup of coffee in a café whilst out shopping. Although most people do not want to give up such luxuries and treats, this can create huge savings and make a big difference to their budget. For example, the average person spends around £452 every year just in coffee shops!

One of the biggest monthly spends is often in the supermarket and this can be an area where huge savings are made. Many individuals never take a shopping list to the supermarket, or if they do, they usually buy additional items which were never on the original list.

By planning your menu in advance for the week and then making a list of what you need and actually sticking to it when you get to the supermarket, you could potentially save hundreds of pounds every year and avoid wasting and throwing away food which has gone past its best before date. By simply doing this, it may not even be necessary to switch from the particular brands which you prefer, even if they are more expensive.

Once all the cutbacks have been made, you should then keep track of your expenditure. Keep a notebook and jot down your income and outgoings as they happen. Note down your income each month and immediately deduct any bills which you know will be going out over the course of the month, such as home owner loan, utility bills and personal loans and credit card repayments.

The remaining balance is your disposable income for the month and this should be broken down into a weekly amount so that you know just how much you are able to spend before your next pay day. Once again, you should keep a note of every bit of expenditure you make, and keep a running total and remaining balance for the month.

It is also important to try and budget for some savings each month and put this money into a separate account so that it doesn’t get spent accidentally. This can be used for emergency purposes, so that when the car breaks down, or the washing machine blows up, there is money available, rather than having to take out another personal loan in order to find the money.

It may seem hard to do, particularly for the first couple of months or so, but by sticking to a budget plan properly, you may well find that you son have disposable income left over each month, which can be used to fund savings, pay for treats and luxuries once again, or overpay on your personal loans and reduce credit card balances much quicker.