Here is a basic overview of how to manage your finances. It is written for people on the autism spectrum, but may also be useful for their friends and family. Not every piece of advice here will be relevant to everyone, as each person and situation is unique. At times, financial matters can be quite straightforward but at others can be quite complex.
Find out about budgeting, banking, saving, insurance, borrowing money, managing debt, your rights and where to get more help and advice.
What do we mean by 'managing money'?
By managing money, we mean keeping your money safe, making sure you have at least enough to pay for your needs, and staying in control of any payments you have to make. We'll explain a few ways of doing this, including using a bank account, budgeting, paying bills, saving, borrowing money and taking out insurance. These are the basic activities that most people in the UK carry out to keep in control of their finances.
Why manage your money?
For many people, managing money is not very interesting. But it is important. Here's why.
- It helps you avoid stressful situations, such as getting into debt, or running out of money so you can't pay for things.
- It helps keep your money safe - for example, in a bank account.
- It helps you get the most out of your money - for example, by making sure you do not pay more than you need to for services, by shopping around.
- It can help you do things more simply - for example, setting up automatic payments of bills rather than having to remember to pay them each time.
- It enables you to plan ahead - for example, booking a holiday several months in advance, when you know you will have sufficient money to pay for it.
- It can be satisfying to feel in control of this part of your life, and perhaps to watch your savings grow. Saving even small amounts of money as regularly as you can will help give you the security of knowing that you have some you can use if an emergency arises.
A budget is a plan detailing how you spend, based on how much money you have coming in and how much you need to pay out.
The first step in managing your money is to work out your budget and keep to it. This means looking at your income (the money you are receiving) and your outgoings (the money you are spending), and making sure you have more coming in than going out. This will tell you whether you have enough to pay for everything. If you add up what you spend and discover that your outgoings are higher than your income, you need to find ways to reduce what you are spending.
Budgeting will help you:
- keep track of money going out
- avoid spending money that you don't have
- deal with debt by planning repayments in a way that you can manage
- work out how much (if any) money you can save
- decide whether you can afford to buy something that you would like.
You can work out your budget by following the steps below.
Step 1: fill out a budget sheet
Think about how much you spend each month. It might help you to look at any recent bills and bank statements. If you're not sure, try writing down everything you spend over a week, or a month. The next thing to think about is filling in a budget sheet.
Download our two example budget sheets. One is for Joanne and the other is for Adam, so that you can see two individuals' income and outgoings, whether they manage to save any money, or whether they need to cut back on their spending.
Step 2: calculate your income and outgoings
You can do your own budget calculations using the Money Advice Service online budget planner. This tool will work out the total of your income and the total of your outgoings).
Tip: If you don't want to use the online budget tool, but instead want to work out your budget by hand or in a table or spreadsheet on your computer, remember that the amounts shown in your budget should be either monthly or weekly amounts, never a mixture of the two.
- To convert a monthly amount into a weekly amount: multiply it by 12 to get the total annual amount and then divide by 52 one for each week of the year. For example, if your rent is £390 each month but you are working out a weekly budget, multiply the figure by 12 to get your total annual rent figure (£4680) and then divide it by 52. The amount you spend on rent each week is £90.
- To convert a weekly amount into a monthly amount: multiply it by 52 to get the total annual amount and then divide it by 12 one for each month of the year. For example, if your wages are £180 each week but you are working out a monthly budget, multiply the figure by 52 to get your total annual income (£9360) and then divide it by 12. The amount you earn each month is £780.
- To include quarterly bills in your calculations: if you are working out a weekly budget, take an average quarterly bill multiply it by 4 and then divide it by 52 this will give you an amount for each week of the year. If you are working out a monthly budget, multiply it by 4 and then divide it by 12. This will give you an amount for each month.
Step 3: take action
Look at the results and decide what changes you need to make. If you have some money left, then you have a positive balance. This means that you regularly have spare money left over, which you could use to:
- repay debts such as overdrafts or credit card bills
- save regularly for example, for a special occasion, or perhaps for buying something for your home, such as a new sofa.
If you have no money left, or if you end up with a minus figure (such as -£15), then you have a negative balance. This could mean that you don't have enough money to cover you in an emergency, for example if you have to travel to see a sick relative, or even that you don't have enough for your basic living expenses. It may also mean that you are getting into debt.
If this is the case, you need to do one or both of the following:
- find ways to increase your income for example, by working extra hours to earn more
- find ways to reduce your spending by looking again at your budget information and deciding which non-essential items you will spend less on. These will probably include items in the leisure category.
Tip: If you have a negative balance and your outgoings include debt repayments, contact one of the helplines listed in the 'Useful contacts' section. They may help you reduce your repayments or transfer your debts to a better lender. You may also want to get in touch with your local Citizens Advice Bureau, which may have a debt advisor who can help you.
Step 4: regularly revise your budget
It is important to work out your budget regularly for example, every six months to check that you are managing your money well and to do a new budget each time your circumstances change. For example:
- if you are moving home you may need to buy new items such as furniture, and perhaps pay higher bills than in your previous home
- if you want to go on holiday you will need money for travel, accommodation and spending money while you are away.
- if your income drops, for example if your benefit entitlements change, or if you stop working, you may need to find ways to reduce your spending.
Using a bank account
A bank is a safe place for you to keep your money until you want to spend it. When we talk about banks, we are also referring to building societies and post offices, which offer banking accounts.
If your financial affairs are very simple, you could choose to receive payments and pay bills exclusively in cash. There are some advantages of doing this - for example, you can see easily how much you have available to spend. But most people do keep their money in a bank (or building society, or a post office account), for the following reasons.
- Keeping money in a bank is safer than carrying large amounts of cash or keeping it at your home, as it could become lost or stolen.
- Some companies, such as internet shops, will not accept cash.
- If you keep money in the bank you might earn interest, so the amount you have will grow.
- By using a bank account you can make and receive payments conveniently and sometimes more cheaply than with cash. For example, many companies charge less if customers pay their bills by direct debit.
- If you have a cashpoint card, then depending on the facility that your account offers you can access your money easily from many cash machines around the UK and (with some cards) around the world.
- If you need to spend more money than you have at present, a bank might give you an overdraft a temporary loan.
- Having a bank account can help you to develop a credit record information about your past financial activity. If in the future you want to borrow money from a bank, credit card company or mortgage lender, they will need to look at your credit history to see if you are reliable.
Choosing a bank account
If you want to open a bank account, there are many different options to choose from. Your decision will depend on how you answer these questions.
- Which way of paying in and withdrawing money would you prefer? Many banks offer internet or phone banking, so that you don't have to go to a branch in person. If you want to do your banking in person, you may think about which banks have branches near where you live or work.
- What do you need the account for? If you are receiving a salary and paying a number of utility bills, you may want a current account, which offers a range of ways of paying in and receiving money, and it may be useful to have an overdraft facility. If you don't carry out a lot of transactions, you might prefer to put your money in a savings account, which will earn you higher interest, although you may not be able to write cheques or use a debit card with this account.
- Do you have a good credit record? If you don't, or if you don't have any credit history at all, you may only be accepted for certain types of bank account. A bank is not obliged to accept your application, although if you feel they have turned you down unfairly, you can complain.
- What sort of interest rate do you want? If you have savings, look for an account that pays higher interest levels, making sure that you check the terms and conditions carefully.
- Do you not want to receive interest or not want to access credit? If not, you might want to consider a basic bank account.
- Do you want an account simply to receive the Department for Work and Pensions benefits you may receive? If so, you may wish to consider opening a Post Office Card Account. This account can only be used to receive these benefits, and for withdrawing cash. No other payments, such as housing benefit, can be paid into it. This simple account will not let you go overdrawn and does not incur charges.
Tip: you can compare bank accounts by looking in the finance section of newspapers (such as The Guardian on Saturdays) or by going to www.moneysavingexpert.com/banking. Check how much interest the bank will pay you on money you have in your account, and what they will charge if you go overdrawn.
Opening a bank account
When you open a new account you will need to fill in an application form. This may be a paper form, or it may be online. Before you sign anything make sure you read the terms and conditions and that you are happy with everything, or ask someone you trust for advice. Once you have signed, the form will be a legal contract.
You will also need to provide some identity documents to prove who you are and where you live. Banks and building societies will normally ask for one identity document (such as a passport) and a proof of address (such as a recent utility gas, electricity or water bill). If you do not have any of these documents, they may accept an alternative, such as a letter from your doctor who has known you for a long time. If you have difficulty in proving your identity, the member of staff dealing with your application can usually pass the matter to someone who is authorised to decide in exceptional cases.
Making payments and withdrawals
Once you have a bank account, you can receive payments and you can make payments of your own, to other people or organisations.
You can receive payments into your bank account in the following ways.
- Cash: if you receive a sum of cash, you can pay this into your account by going into a branch (or a post office for some accounts), or through a creditpoint machine, using a paying-in slip a form that you will find in the branch, in your paying in book or in the back of your chequebook. Never send cash in the post.
- Cheque: if someone gives you a cheque, you can pay this into your account by going into a bank branch, by post, or by using a creditpoint machine (which are at some banks). Some banks let you pay them in at the post office too. As with cash, you will need to fill in a paying in slip. The money will not clear for you to use in your account till a few days later.
- Automatic transfer: individuals or organisations, such as your employer or the Department for Work and Pensions might transfer money automatically into your account using standing order or BACS (a service that many organisations use to pay salaries or benefits). If you are expecting an automated payment, you will need to check your balance to find out when this money appears in your account.
You can pay out money to other people or organisations in the following ways.
- Cash: you can withdraw cash from your bank account either by going to the branch of your bank or going to a cashpoint machine and using your card and your PIN number, or possibly by going to your local post office. Some machines (usually in small shops or petrol stations) will charge you a fee to withdraw cash, so check first. You can practice using a cashpoint machine on the Money Matters to Me website. See also 'Using a bank card' and 'Using a PIN' below. Some retailers, such as supermarkets and petrol stations, may offer you cashback when you make a card payment. For example, if your shopping comes to £19, they may charge you £39 and give you £20 cash. This can be a safer way to access your cash than using a cashpoint machine because you are not handling cash in the street.
- One-off automated payments: you can ask your bank to make a one-off payment to an individual or company by providing their bank account details.
- Standing orders are automatic transfers set up by you, as the account holder, so that you can pay a fixed amount into another account on a regular basis.
- Direct debits are similar to standing orders, but they are controlled by the company you are paying, rather than yourself. They are often used to pay utility bills, such as the electricity or phone bill, each month. The company may change the amount it takes from your account, as long as it gives you ten days notice. This will usually depend on how much you use for example, your phone usage might change each month, so the amount you pay will change, too.
Some companies, such as phone or gas companies, will ask you to pay a fixed amount every month, based on their estimate of how many phone calls you will make, or how much gas you use. If you think their estimate seems too high, ask the company to reduce the payments to a more realistic level and to pay back any surplus on your account.
It may help you to work out how to take your gas or electricity meter readings so that you can compare them with the estimates the gas and electricity companies send you. Guidance on reading your meters is available on the Money Matters to Me website.
- Cheques: if you have a current account rather than a basic account, your bank will give you a chequebook, which you can use with your cheque guarantee card (which is often your debit card). The only person who can receive the money is the person whose name is written on the cheque, so if it is lost in the post or stolen, your money will be protected. You need to make sure you have enough money in the account before you write the cheque. The money will leave your account on the day the other person pays it into their bank. Few shops now accept cheques especially for amounts under £5.00 and people increasingly prefer to use debit cards instead.
- Using a bank debit card: debit cards are used to pay for things in shops, on the internet or over the phone, and the money comes directly out of your bank account. You can also use them for cash back as way of getting cash from your bank account when you pay for something in a shop such as a supermarket. Depending on the facility that your account offers, you can use your card to withdraw cash at cashpoint machines across the UK and the rest of the world. You can check whether the shop or cashpoint machine will accept your card by seeing if they display the same logo that you will find on your card.
Which card is which?
There are a number of different types of plastic card that can be used to pay money.
- Cashpoint card: this is a bank card used to withdraw money from a cashpoint machine using a PIN (see 'Using a PIN').
- Debit card: this is a bank card used to pay for things and the money automatically comes out of your account, using a PIN. You can also use it as a cashpoint card. If you have a chequebook, this card will usually act as a cheque guarantee card too.
- Credit cards: these are used to borrow money from a credit card company. You can use them like debit cards, but instead of the money coming out of your bank account, the credit company pays the bill so you don't have to pay for things straight away. You then pay a bill at the end of each month. Interest may be charged on amounts you owe.
- Store cards: these are the same as credit cards, but you can only use them at the shop whose name shows on the card.
- Pre-payment cards: these cards need to be paid for in advance (like a mobile phone top-up) before they can be used.
Tip: paying with a card can be so easy, it can almost seem as if you're receiving things free of charge, but of course, you're not. If you use cards, make sure you check your statements regularly so that you know how much you have spent and check that you can manage to repay. Credit cards and store cards often charge high interest rates if you don't pay back everything you owe within a month.
Using a PIN
Most cash and debit cards have a microchip, which looks like a small gold square. These cards must be used with a personal identification number (PIN) - a number that only you know. You need to type this number in when you want to withdraw money, make a payment or withdraw cash using a card.
You need to keep your PIN secret at all times. If you find it hard to remember the number, try remembering the pattern the numbers make on the keypad, or change your PIN to a date that is important to you, such as the birthday of someone you know. Don't write it down.
Tip: if you ever feel uneasy when you are using your PIN, for example because someone is standing too close to you by a cash machine and you think they could see your number, go to another machine or come back later.
Keeping track of your bank balance
It is important to know how much money you have in your account, and what amounts will be going out or coming in in the near future. If you receive cheques or payments by automatic transfers, you may not realise that money has come into your account, or you may think you have more than you actually do.
Here are some ways you can check your balance.
- Reading your bank statement: a bank statement is a list of all the transactions (money coming in and going out) that are made to and from your bank account. Banks send out statements regularly (usually every month), or tell customers when their new statement is available online. It is important to read your bank statements. They tell you how much money you have in your account and whether your wages or benefits have been paid. You can also check that there are no errors in the bank's records, for example, a shop might have accidentally charged you too much. The statement will show the names of places where you have spent your money and of organisations that have paid you. If you see the letters ATM this means you have withdrawn money at a cashpoint machine. Use your bank statements to get an overall idea of what you are spending, and to remind yourself what direct debits and standing orders you have. When you have read them, keep them in a safe place.
- Phoning the bank: most banks have an automated service for checking the balance of accounts. You will need your card details to hand, and will need to confirm some personal information as a security check.
- Checking your account online: if you are confident about the security of your computer and you have an online bank account, or your account offers an online banking facility, you can read your statements any time, day or night.
- Using the cashpoint machine: if you want to see your current balance you can simply use your card at a cashpoint machine, or to view recent transactions you can print a mini-statement.
Tip: by the time a bank statement is printed off and posted to you it will already be a couple of days out of date. The other methods mentioned above may be less detailed but should be more up to date.
Saving means putting money aside over time so that it builds up to an amount that you can use as you choose. There are three main reasons you might want to do this.
- To pay over time for something specific - for example, to help you pay for something expensive, such as home improvements, going away to college, or retirement.
- To build up a fund for treats - if you put aside money each week or month, you will have a sum of money that you can use occasionally to buy something such as new clothes or a night out.
- To protect yourself in the future - this will help make sure that you will have enough money to pay for essentials if things go wrong, for example if you are unable to work, or if you need emergency repairs for household equipment.
Tip: before you start saving for particular circumstances, for example if you were unable to work due to sickness, check to see whether you would be covered by insurance (see the section 'Insurance') or benefits.
You might want to save by putting money aside as and when you can. If you decide to start saving regularly, try to decide on a regular amount and stick to it. Doing the budgeting activity covered on the 'Budgeting' section will help you decide how much you can afford. Choose a bank account that will give you high levels of interest. This means that as well as your savings, you will earn a little extra from the bank.
The options for savings accounts include:
- easy access accounts: with these accounts you can withdraw your money whenever you want, without giving any notice, usually using a cashpoint card
- notice accounts: these accounts will earn you a higher rate of interest but you must give advance notice if you want to withdraw money (for example, 30, 60 or 90 days). If you do not give notice, you will lose your interest. If you choose this option, make sure you will not need to access your money in a hurry, and put an amount for emergencies in a separate account
- regular savings accounts: with these accounts, you pay a fixed amount of savings each month. They can be useful for getting into the habit of saving some money each month, but if you do not keep up the payments you will lose some interest
- cash ISA: this is a way of saving or investing without paying tax and with generally good rates of interest. There are, however, limits on how much you can save in each tax year into a cash ISA (the limit for financial year 2013/14 is £5,760).
When you are thinking about opening a savings account, look out for:=
- interest rates: some accounts have a higher interest rate for an introductory period, and then it drops. Others have a rate that goes up the more money you have in the account
- notice periods for withdrawing your money without penalties, such as 30, 60 or 90 days
- limits on how much you can save, or how long you have to keep the money in the account to get a high interest rate
- the way interest is added: some accounts add it monthly and others once a year
- minimum deposits: some accounts require a certain amount to be paid in regularly
- additional bonuses: these are usually payable only in certain circumstances, and you should make sure you understand what these are
- tax-free savings: by using a cash ISA (Individual Savings Account). They usually pay a higher interest rate than normal savings accounts, and this is not taxed.
An alternative to saving is investing. This means putting your money into a fund that has no guarantees. When investing, you take calculated risks to increase your chance of getting higher returns on your money, especially over the longer term (money you can afford to tie up for five years or more).
There are different types of investments but, basically, you take a risk with your money by investing in assets (usually on the stock market) that could rise or fall in value. There is no guarantee you will make a return on your investment or even that you will get back the same amount you invested in the first place.
Note. If you are on a low income (and do not pay tax) and have savings in a bank or building society, you could be paying tax on your savings when you don't need to. If this is the case, you can register to have the interest paid tax-free by completing an R85 form
Insurance is a way of protecting yourself against unforeseen circumstances.
Here are some examples of the kind of incidents you may need insurance for:
- a driving accident
- a flood in your home
- your television breaking
- being burgled
- needing expensive dental treatment
- losing your suitcase on holiday.
How does insurance work?
An insurance company will agree to cover your costs against a particular set of circumstances - for example, home insurance covers you against a range of damage that might happen to your home. You buy this by paying what is called an 'insurance premium' in one annual payment or in monthly instalments. If something goes wrong (for example, your home is flooded), the insurance company will then pay out as long as the circumstances meet all its conditions.
Insurance can be very expensive, and it has many exclusions and conditions. For example, if you were flooded because you forgot to turn off a tap, then the insurance might be invalid, and the insurance company would not have to pay you anything. Always check all the exclusions and conditions listed before taking out any insurance to make sure that there is nothing in your circumstances which might make it invalid.
Some types of insurance are compulsory. For example, it is illegal to drive a car without being insured. If you buy a house or flat, mortgage lenders normally insist that your property is protected by buildings insurance.
However, most forms of insurance are optional. You need to decide what level of risk you are prepared to take, and whether the payments you would make on an insurance policy are likely to be worthwhile. Instead of taking out insurance, you might decide that you can use your savings, rely on benefits or borrow money instead.
Finding the right policy for you
There are many different types of insurance policy and it is important that you choose the right one for you and your particular circumstances. One way to find an insurance policy is to search through the price comparison websites such as www.confused.com, www.moneysupermarket.com, www.comparethemarket.com and www.gocompare.com . Some financial experts recommend that you search through all four of these sites to find the cheapest deal. You may find cheap deals, but you have to be sure that the policies really do cover what you need. Some of you may find this a daunting task to do on your own.
When you find the policy you think you want, make sure you read all the documentation carefully, or ask someone you trust to read it for you and explain the important sections, before you agree to anything.
If you would prefer to speak to an expert on the phone or face to face, you can find a financial adviser through www.unbiased.co.uk . Always make sure that the first question you ask of a financial adviser is the cost of their service.
Tip: before you agree to take out any insurance policy, take time to think about it, and consider discussing it with someone you can trust. Never agree to anything if you feel rushed or under pressure. Think about whether you really need or want it.
If you do decide to borrow money, make sure you do it wisely. Here are some tips to make sure you get the best deal for you, and to prevent yourself from getting into difficulties.
Some ways of borrowing are cheaper than others, so if you do need to borrow money make sure you do your research. Find out the APR (the annual percentage rate) which will tell you how much interest (extra money) you will be charged for the loan (the amount you borrow). Make sure you can afford the repayments. Use the information in the section 'Budgeting' to help you work this out.
Find out about any other charges and what will happen if you miss a repayment or want to repay the money early. Generally it is better to pay back a loan as soon as possible to avoid paying too much interest. However, make sure that you avoid being charged for early repayment.
It's easy to think of a loan as free money. It is actually expensive as you will have to pay it back and at a price. You will need to pay back the original sum borrowed and interest as well. Only borrow money when you really need to, and pay it back as soon as you reasonably can, but avoiding any extra charges, such as an early repayment charge.
- Get a clear picture of your finances. Before you consider taking out a loan, you need to be clear about your financial situation. This will help you be realistic about how much you need to borrow, and what repayments you will be able to afford. The best way to do this is by working out your budget. Download our sample budget sheets or use this online budget planner.
- Check whether you are creditworthy. When you apply for a loan you will be asked lots of questions about your lifestyle and what you spend your money on. The lender will use this information and your credit report to produce a credit score. If your score is low, some lenders may not lend to you, or will only offer you more expensive loans, as they see you as a higher risk. If this happens, you could try other lenders, as different companies have different scoring criteria from one another.
- Make sure you can afford the repayments. Weigh up all the costs of the loan you are considering, including the APR (Annual Percentage Rate) and any fees and charges and repayments. Make sure you understand exactly how much you will need to repay each month or week, and over what period of time. If you won't be able to afford the repayments, then you can't afford to take out the loan, and you will need to look at other options.
- Avoid borrowing money to pay off an existing loan. If you want to borrow money in order to pay off your existing debts, talk to a debt counselling organisation first (see 'Useful contacts' below). They will offer you support and advise you on the cheapest and most appropriate way to do this.
- Open your bills and pay them promptly. Never avoid looking at bills, even if you're worried about how to pay them. If you don't make repayments on time, your debts can quickly spiral out of control. If you are having problems paying, always stay in contact with the lenders. (See the section 'Debt')
- Don't borrow more than you need. If you are taking out a loan for a specific purpose, it can be tempting to ask for a little extra to pay for a treat. However, remember that you will have to pay interest, and you will need to repay it all later. Try to keep your debt to the bare minimum, and save in advance for anything else.
- Check you have the best deal for you. Regularly reviewing all your financial products, including mortgages and credit cards, can help you make sure you are not paying more than you need to. You can find the best deals in the weekend newspapers or at websites such as www.moneysavingexpert.com . However, you may find this a daunting and time-consuming task to do very frequently and find it very stressful to keep changing. Sometimes the best deals do not remain competitive for a long period, and it can be costly to change. Always take time and care when you are choosing a financial product or service in the first place.
- Repay as soon as you can. Owing money is usually expensive and can be stressful, so try to pay your debts off as soon as you can. If you have both debts and savings it is often cost-effective to use your savings to pay off as much of the debt as possible, because the interest that you pay on your debts is usually more than the interest you will receive on savings. However, check that you will not have to pay a charge for repaying a loan early. If you do, you may be better putting your savings in a high-interest account until the time when you can repay your loan.
Tip: if you are refused credit, ask the lender which credit reference agency it used. You can then contact the agency and check your file, for a fee. There may be a mistake on your file that needs correcting. The lender may refuse you credit simply because you have no credit history. You can create a credit history over time, by making sure you have at least one household bill in your name or a bank account. Also make sure you are on the electoral register so that lenders can confirm where you live.
The main ways of borrowing money
The list below describes some of the different forms of borrowing and the risks and responsibilities involved. It may help you to decide whether you do need to borrow, and if you do, which form of borrowing may be appropriate for you and which to avoid. Remember that any loan (amount borrowed) needs to be repaid, and most need to be repaid with an additional amount charged - the interest. Having more than one or two loans at the same time can be a strain on anyone's finances.
- From friends or family. People sometimes borrow money from friends or family. If they have a close relationship, this may be fine. However, some people don't like to be asked to lend money, and it may cause problems between the individuals concerned, especially if there are problems repaying the person on time. If you do borrow money from someone you know, make sure you pay it back before they have to ask you for it. It's a good idea to agree dates for the repayment of the loan beforehand, perhaps in instalments, and to put that in writing. National Debtline states that you should treat personal debts in the same way as any other debt, offering regular payments until the debt is cleared.
- Overdraft. People who have a current account with a bank may be offered an overdraft (say, up to £500) that can be borrowed if they don't have the money in their account. If they don't spend more than the agreed amount (the authorised overdraft), they will only pay interest on what they owe, so this is a relatively cheap way to borrow. However if they spend more than that amount - for example, if they have no money in their bank but a £200 overdraft limit and they write a cheque for £250 - then they will incur bank charges as well as the interest. This is an expensive way to borrow. If you have an overdraft and discover that you have spent more than your agreed limit, contact your bank at once. It may agree to increase your overdraft limit or come to some other arrangement to reduce the charges. Some banks offer free overdrafts with some accounts, although they normally have set conditions, such as a minimum deposit each month or a monthly fee. Remember that you will always need to pay back an overdraft. It is always possible that lenders may withdraw their offer of an overdraft at any time.
- Credit cards. These are used to borrow money from a credit card company. They can be used like debit cards to buy things, but instead of the money for the goods or services being taken straight out of a person's bank account, the credit company pays the bill. The person named on the credit card then pays a bill at the end of each month. If the amount owed is paid in full each month, this may cost no extra money at all. However, if the balance builds up over time (for example, if the person forgot to pay their monthly bill), or if only the minimum repayments shown on the bill are made, it can become an expensive way to borrow. This is because interest is charged on the amount owed. For example, it may take 18 years to pay off a £1,000 loan from a credit card company if only the minimum repayment is made each month. Store cards and affinity cards work like credit cards, except their interest rates are usually higher. Anyone thinking of signing up for one should always ask themselves if they really need it.
- Personal loan (unsecured). A personal loan is a fixed amount that someone borrows and repays in instalments over an agreed period of time. This kind of loan can be made by a bank, for an unspecified purpose, or by a retailer for a specified purpose - for example, buying a car. This is called an unsecured personal loan. Some retailers offer interest-free credit to encourage customers to buy large items, such as cars or furniture. Here, there is no interest charged, but if the borrower fails to make repayments there may be high penalties so it's important to always read the terms and conditions.
- Personal loan (secured). Someone who owns their own home can take out a secured personal loan, which can be cheaper than an unsecured loan, but is secured against your home. This means that if the person can't keep up the repayments he or she may lose their home. This makes it a very risky option.
- Mortgage. A mortgage is a large loan secured against a property - usually a person's home. A person buying a house or flat will usually take out a mortgage to provide most or all of the cost. This is repaid each month over a long period - for example, 20 years. If the person doesn't keep up repayments then the mortgage lender can take ('repossess') the property back from them.
- Catalogue buying. A customer may select items from a catalogue to buy by mail order. Instead of paying the full amount straight away, he or she spreads the payments over a number of months or weeks. However, the catalogue company will charge high interest rates, and their prices for the goods may be more expensive than in some shops.
- Hire purchase. Monthly payments are made by the customer to a retailer for a specific item (for example, a car or electrical goods) over a period of time. However, the item only becomes the customer's when all the payments have been made. Until then, the customer is hiring it from the company. If he or she falls behind with the repayments the company may be able to repossess the item.
- Doorstep lenders. These are representatives of companies which offer small loans (typically up to £500) and come to the borrower's home to collect regular repayments. They may be flexible if the borrower has problems repaying, but their overall charges are very high.
- Loan sharks. These are unauthorised doorstep lenders: they work illegally. Always avoid using them - they are very expensive, and some will threaten borrowers in order to recover their money. Some loan sharks may also run a legitimate doorstep lending business - so be careful. Contact the local trading standards office at your local council offices if someone tries to lend you money in this way.
- Student loan. This is a loan scheme run by the Government with a specific purpose: to pay for university students' living costs and tuition fees. Students are required to repay these loans once they have left university and are earning over a certain amount. For courses starting on 1st September 2012 or later, this amount is currently £21,000 gross per year for people in England or Wales, and £16,365 gross per year for people in Northern Ireland or Scotland. For more information on loan repayments, see www.studentloanrepayment.co.uk . It is a cheap way of borrowing a large amount of money for this specific purpose, but it does mean that students have a large sum of money to repay after finishing their studies.
- Social fund. This is a government fund that offers interest-free budgeting loans and crisis loans (which need to be repaid) to people claiming certain benefits, as well as grants. Find out more about the Social Fund.
- Community lenders. There are a range of options provided by community bodies, such as religious centres and community groups. Credit unions are mutual self-help groups that provide loans and are regulated in the same way as banks. Sometimes you have to pay money in for a period of time before you can borrow money. Community organisations may also provide loans as Community Development Finance Initiatives, usually to small businesses and community projects, but some offer loans to individuals, usually in deprived areas. Be aware that if you borrow from a small, unregulated community scheme and it went bust, you would not be able to claim compensation from the Financial Services Compensation Scheme.
- Unpaid bills. Failing to pay bills is in fact a form of borrowing, because if you have received a service and have not paid for it then you owe someone money - perhaps your landlord or a utility supplier (such as electricity or gas), or a bill from someone else such as a solicitor, vet or dentist. If you are having problems paying a bill, please see the Making Payments and Debt sections below.
Tip: for credit cards, bank overdrafts and some other loans, interest is worked out on a regular basis, depending on how much you still owe each month. If the amount you pay off each month is less than the amount of interest you are being charged, then the amount you owe will actually increase each month. So it's important to clear the balance in total as soon as you can.
When you borrow money, you are entering into an agreement with a lender to repay it in the amounts and timescales that you agreed. If you don't do this, the lender is entitled to take steps to get its money back.
What will happen if you fail to make a repayment depends on who you owe the money to. With certain lenders failure to pay can result in you going to court, having to file for bankruptcy, losing your home, or even going to prison. Understanding what happens if you don't pay will help you prioritise your bills - in other words, decide which are most important to pay.
What happens if you don't pay your...
- catalogue shopping bills? You could be refused any further credit and you could be taken to a county court, but you cannot be imprisoned.
- council tax bill? A bailiff could take your possessions, you could have money taken from your benefits or wages, and you could go to prison.
- credit card or store card bills? You could be refused any further credit and you could be taken to a county court, but you cannot be imprisoned.
- electricity, gas, telephone or water? You could have services cut off (except for your water supply), and you could be taken to court.
- fines from the magistrates court if you've broken the law, such as not paying your television licence, or having been caught speeding? A bailiff could take your belongings, and you could be sent to prison.
- hire purchase agreements? The lender might be able to take back the item. How serious this is depends on how important the item is to you - for example, if it is your car, which you need to get to work, then this is very serious.
- loan from a family member or family friend? You risk losing their support and friendship altogether and causing a huge amount of anger and problems in your family.
- maintenance for other people, such as child maintenance? You could have money taken from your benefits, wages or bank account, a bailiff could take your belongings, and you could go to prison.
- overdraft? You could be refused any further credit, you could have money deducted from any other accounts you have with the same bank, and you could be taken to a county court, but you cannot be imprisoned.
- personal loans? You could be refused any further credit, you could have money deducted from any other accounts you have with the same bank, and you could be taken to a county court, but you cannot be imprisoned.
- rent or mortgage? You could be taken to court to recover the rent, and you could lose your home.
- secured loan? You could lose your home.
- taxes? A bailiff could take your belongings, you could be fined.
- TV licence? You could have money deducted from your wages or benefits, a bailiff could take your belongings, you could receive a very big fine, and you could go to prison.
- loans of more than £750? If you owe more than £750 to a creditor or a group of creditors, it is possible that they could take you to court and make you bankrupt. However, it really is a last resort. The aim of bankruptcy is to claim property and assets which can help pay off creditors. People in debt can decide to make themselves bankrupt, but this action costs money and can have quite serious consequences, especially if they are a home-owners, as their houses could be sold to pay off the debts. Bankruptcy may only be a solution in extreme cases when a person has very few assets indeed. Further information on bankruptcy can be obtained from National Debtline.
Because the outcome of not paying some bills is so serious (such as having your home taken from you, going to court or to prison), it makes sense to pay these ones before paying the others.
- Electricity, gas, telephone or water
- Magistrate court fines
- Maintenance for other people
- Rent or mortgage
- Secured loan
- TV licence
- Credit cards
- Hire purchase agreements, depending on what they are for
- Loan from family friend
- Unsecured personal loans
- Store cards
If you can't pay all your bills at once, make sure you pay the ones listed above as priority payments first. When they are paid, turn your attention to the non-priority payments. Prioritising your payments in this way may be enough to help you manage your debts until you have more money in the bank.
If you are consistently struggling with debts and meeting repayments, you need to take action. If you are in this situation, try not to worry - many people find themselves in debt, and there is a lot of support and advice available. This section sets out a step-by-step action plan.
If you are not sure whether your debt is unmanageable or not, take the online Debt Test.
Step 1 Don't ignore the problem. The longer you leave it, the worse it will get.
Step 2 Stop borrowing any more money to repay existing debts without getting independent advice first.
Step 3 If you still haven't done this, do a budget sheet to get a clear picture of your income and outgoings. Make sure you include all your debt repayments in your outgoings.
Step 4 Check whether you are receiving all the benefits and tax credits you are entitled to. If you are unemployed or off sick, check whether any of your debts are covered by payment protection insurance.
Step 5 Work out how much money you could realistically spare, once you have paid for your living expenses, in order to repay debt.
Step 6 Draw up a separate list of each of your debts, your repayment schedule, and prioritise them.
Step 7 Having pulled together detailed information about your finances, if you still feel that you can't manage repayments without some support, contact one of the organisations listed in 'Where to go for support' (in the 'Resources: Borrowing money and managing debt' section) for advice. However, if you can, try to resolve problems yourself, by tackling steps 8 to 10 in this list.
Step 8 Put all your available money towards paying off your priority debts - for example, debts that could mean having your electricity cut off, or losing your home.
Step 9 If you can't clear your priority debts in full, contact the lenders and agree on a realistic repayment schedule. Show them a copy of your budget sheet. Ask them to freeze the interest while you repay the backlog. Don't worry if the amount seems small if that is all you can afford - it's better to agree to a realistic sum that you will actually manage to pay than to agree to a higher sum and then miss your repayments. You may be able to get help if you have debts with your utilities (gas electricity and water) companies - you could be eligible for a grant to help you pay such a debt. The Utilities trusts and schemes booklet listing the companies which offer help is available on the British Gas Energy Trust website.
If you are having problems paying your credit card debt, then your credit card company may even consider accepting a payment of £1.00 a month if you are in real difficulties. You can find detailed advice and sample letters in a pack from National Debtline. If your creditors are being difficult, don't give up. If the first person you speak to is unhelpful, ask to speak to someone more senior.
Step 10 Now, spread any other money across your non-priority debts, such as credit cards. Contact each lender one by one, and agree on a realistic repayment schedule, as in step 9. Try to pay off the most expensive debt first.
If you are taken to court, contact one of the independent advice services listed in the 'Where to go to for support' section below, for advice. Fill in reply forms to any court papers and send them off promptly. Make sure you go along to any court hearings, and take your budget sheet with you, as they will use this to decide what you should pay.
Tip: make notes of everything you agree on the phone, and keep copies of any letters you send or receive. Ask lenders to put everything in writing so that you have a record of all that they are asking.
Where to go for support
You may have seen advertisements from companies offering help with debt. Some seek to make a profit out of people in debt, and you should avoid them as there are a number of reliable independent debt advice services offering free help in sorting out debt
Money and your rights
Managing your money is a complicated area in which many - though not all - autistic people feel they need some extra support.
Under the Equality Act 2010, or the Disability Discrimination Act 1995 in Northern Ireland, banks and other finance companies must not discriminate against anyone on the grounds of disability or treat people with disabilities less favourably than anyone else because of their disability. They must also make 'reasonable adjustments' for people with disabilities. This means that they have a duty to change any practice, policy or procedure that makes it difficult for people to use their services - for example, by providing bills or statements in more accessible formats, or by agreeing to meet the person face to face rather than writing letters to them.
Some people on the autism spectrum have problems using online facilities and PIN numbers. In this case, the bank is required to offer an alternative way of paying. Others have problems signing their name consistently. In this case, there are a range of alternative options, such as writing some other form of mark, providing ID or nominating someone else to sign instead.
If you have any problem using financial services, talk to your bank. If you are still not satisfied, contact the Equality Advisory Support Service (EASS) at www.equalityadvisoryservice.com
Managing someone else's finances
If someone does not have the mental capacity to make decisions about their finances, or if they would prefer someone else to make these decisions, they will need someone else to manage their financial affairs and make transactions on their behalf - for example, writing cheques or withdrawing money from their savings account. The person acting on someone else's behalf could be:
- an attorney appointed under an Enduring Power of Attorney or Lasting Power of Attorney
- a deputy appointed by the Court of Protection
- someone acting under a court order
- an appointee of the Department of Work and Pensions.
You may find it helpful to contact the Office of the Public Guardian.
In some cases, banks have refused to allow anyone other than the account holder to use their PIN or access internet banking on the person's behalf. However, the Equality and Human Rights Commission has helped overturn these decisions. If you need their help in arguing your case, contact the Equality Advisory Support Service (EASS).
Frequently asked questions
1. The money coming in from my income and benefits is less than the amount going out. What can I do?
You need to look carefully at what you are spending, and stop spending on anything that is not essential. At the same time, make sure you are receiving your full entitlement to benefits.
Can you consider working longer hours to increase your income or cutting down on your spending? You may need to look at making a major change, such as moving to cheaper accommodation, or working longer hours to increase your income. Get advice from the Citizens Advice Bureau.
To help you work out the amount you can afford to spend, please see the 'Budgeting' section.
2. My benefits go into my bank account by direct electronic transfer. This means often I don't realise when the amount has been cleared in my account and I accidentally spend too much before it comes in.
It's important to check your bank balance regularly to make sure you are aware of any payments that have gone into or come out of your bank account.
If you use a cashpoint machine to withdraw money, always check your balance first to see that you have some money in your account that you can withdraw. Keep a record of all your withdrawals in a diary or on a calendar. Check back on your statements for previous months to see what date your benefits usually arrive. If you know that the amount is usually in your account during the last week of the month, you can check your balance every day (using the phone, internet or by visiting a cashpoint machine) to see if the new amount has cleared in your account yet.
3. If someone asks me for money, how should I respond?
There are many reasons you might be asked for money in your daily life. You might meet someone begging, or someone might stop you with a clipboard and ask you to donate money to a charity. Alternatively, someone might phone you inviting you to sign up to a product such as a new mobile phone contract, or you may receive letters in the post from charities saying they urgently need your help.
It is important to remember that you don't have to say yes, even if you would have enough money in the bank to do as they ask. Don't ever make a decision if you feel rushed or pressured. Salespeople, and even charity fundraisers, can be very persistent. If you don't want to give them anything just be firm and say no. If you think you might like to buy the service, or support the charity, say you will need time to think about it and perhaps discuss it with someone you trust before making the decision.
It can be difficult to say no if someone you know quite well asks for money, or asks you to buy something for them as they say they are short of money. You may not wish to appear mean. However, it is usually better not to lend sums of money or pay for things in these circumstances as it can be very awkward if people do not or cannot pay you back. This doesn't mean that you can't, for example, buy a friend a coffee, a drink or a meal now and then if you can afford it, but it's important to realise, too, that you shouldn't be the one who pays on every similar social occasion.
4. People keep phoning me to sell me something. Sometimes I have been rude just to make them go away.
If you think you might want to buy the product that the person is selling, state clearly that you need time to research the alternative options before making a decision. Otherwise you may have to be very firm and simply say no thank you and put the phone down.
If you receive a lot of phone calls or post from people trying to sell you things, or asking for donations, you can remove your telephone number or address from their listings by contacting the Telephone Preference Service or the Mailing Preference Service.
5. A salesperson persuaded me to sign up to a new service. Now I've changed my mind, but I have already signed and given the person my bank details.
When you agree to buy a service or product, you are entering into a contract with the person who is selling it. However, you do have the right to a cooling off period, usually of seven days, during which time you can change your mind. For more information, contact the Citizens Advice Bureau.
6. What do I do if I want to complain about a service I have received?
If you are unhappy with your bank, insurance or finance company, the first step is to talk to the bank or company themselves to give them the chance to put things right. If you have already done this and are still not happy, or if you are worried about talking to them directly, contact the Financial Ombudsman Service.
7. I recently used my credit card to buy a computer which was really expensive. Now I'm paying off the minimum monthly amount charged by the credit card company, and yet the bill each month is getting bigger and bigger. Why is this and what can I do?
Credit cards can seem to be an easy way to pay for something, especially if you know you can afford to pay the full amount for the item you've bought at the end of the month. However, it may be that you can't pay off the full amount and so need to repay some money each month. If this is the case, interest is charged, often at a high rate, on the money you still owe. The total sum owed then grows and it can be a real struggle to pay it off.
See how much you can manage to pay off each month - more than the minimum the credit card company is charging, if possible and make sure that you pay it regularly and on time: this will help avoid paying some of the interest you would otherwise be charged.
If you have trouble keeping up with even the minimum repayments, don't panic, but get advice. It's possible that special arrangements can be made for you. Get in touch with your local Citizens Advice Bureau to ask about this.
Further information and contacts
More from the National Autistic Society
Managing money online module
NAS Welfare Rights service offers advice, information and support on all aspects of benefit entitlement.
Banking for people who lack capacity to make decisions (Scotland), British Banking Association (2010).
Guidance for people wanting to manage a bank account for someone else, British Banking Association (2013).
Banking made clear, British Institute of Learning Disabilities (2012)
The Easy Picture Guide to Banking, United Response.
Citizens Advice provides confidential information and advice about a range of issues, including finance, debt and consumer issues or point you in the right direction.
Civil Legal Advice offers free and confidential legal advice, if you’re eligible for legal aid, on the following issues: debt, education, discrimination, housing, family and welfare benefits appeals. The website has a legal aid eligibility calculator.
Disability benefits helpline
Financial Ombudsman Service deals with disputes between consumers and businesses providing financial services.
Home Heat Helpline advises people worried about paying their energy bills and keeping warm during the winter. They can give you information on the grants, benefits and payment schemes that you may be entitled to as well as basic steps that you can to save money on heating bills by making your home more energy efficient.
Mailing Preference Service (MPS) is a central service where you can register your wish not to receive unsolicited mail.
Money Advice Service
The Money Charity provides information about debt and saving.
Moneysavingexpert.com provides tips on a range of financial issues.
National Debtline is a free confidential advice and support for people with debt problems in England, Scotland and Wales.
Ofcom is the independent regulator for the UK communications industries. It provides advice for people experiencing difficulties with any of their communications suppliers, including landline phone, mobile phone, internet and digital TV services. It has guides about how to deal with nuisance telephone calls and messages.
Office of the Public Guardian is for England and Wales and supports the Public Guardian in the registration of Enduring Powers of Attorney (EPA) and Lasting Powers of Attorney (LPA), and the supervision of deputies appointed by the Court of Protection. The OPG also has responsibility for mental capacity policy, and provides guidance to public, legal and health professionals.
StepChange provides a free, confidential service to help achieve realistic solutions to debt problems, avoid bankruptcy and learn to handle money.
TaxAid provides free, independent, impartial tax advice to people who can’t afford to pay a professional adviser, including advice for people having problems paying their tax bills.
Telephone Preference Service is a central opt-out register where you can register your wish not to receive unsolicited sales and marketing telephone calls.
Unbiased.co.uk provides details of independent financial advisers in your local area.
We aim to give you general information to help you make financial decisions. The information does not constitute financial or other professional advice; for advice about your own circumstances, you should consult a professional advisor.