With everything that’s happened in the economy over the last couple of years, a lot of people are particularly keen to minimise their risk of financial problems by staying out of debt.

Most of us need to take on debt at some point or another in our lives – whether it’s a mortgage or borrowing a tenner from a friend until the end of the week – but the less debt you can take on, the less risk you’ll have.

A good way of reducing your risk of getting into debt is by putting together a budget plan.

How to create a budget plan

1. Start by taking your last few bank statements (the last three to six months should be fine) and noting down your regular expenses. This will include things like mortgage/rent payments, energy bills, council tax and groceries. For anything that varies, such as food costs, put down a generous estimate of your typical spend.

Now add up the total – this is your total monthly spend.

2. Now take note of your typical monthly income. If your income varies, make a conservative estimate (i.e. the minimum you think you’re likely to receive). This can help you keep from overspending, and you’ll know that any extra income you receive can still be spent safely, without putting your essential bills at risk.

3. Subtract your total monthly spend from your typical monthly income. What’s left is your spare income, which you can use as you wish.

It really is that simple. If you want to go a bit more advanced, however, you could set up a savings account in which you keep all your money until it’s needed. This can help to increase the amount of interest you earn over time, and it could reduce the temptation to indulge in impulse purchases.

However, if you’re going to do this, you might want to make sure you have an authorised overdraft facility in place just in case any unexpected costs come up. This can help you cope with those costs, leaving you free to focus on clearing your overdraft as soon as possible.

What if I’m still struggling to stay out of debt?

Sometimes people struggle with their finances even if they do try to keep to a strict budget. This can be for a number of reasons: perhaps a few unexpected costs came up that they simply couldn’t afford, or maybe a change in their circumstances means they can no longer afford their outgoings. Whatever the case, if you’re struggling, get advice from an expert as soon as you can.

If you’re already in debt and you’re struggling to pay it back, don’t hesitate to talk to a debt adviser or a debt management company about possible solutions. For example, if you’re really struggling, a debt management plan could help you to reduce your unsecured debt repayments and make them affordable again. Repaying your debts more slowly can damage your credit rating and cost you more in the long run, but this may be unavoidable if you genuinely can’t afford your monthly repayments.