Everyday money: budgets and debt: cheat sheet

The summary, key terms and the trap to avoid for every lesson, in order. Print it, or read it, cover it, and say it back.

Make a budget that leaves room to save Everyday money

Budget from take-home pay: needs, wants, saving.
Turn yearly and irregular bills into a monthly amount.
50/30/20 is a starting guide, not a rule.
Build an emergency fund first, often three to six months of essentials, and save automatically on payday.

take-home pay: income after tax and other deductions: the money that reaches your account
budget: a plan for where each month's money goes
essentials (needs): costs you must pay: housing, energy, food, travel to work, minimum debt payments
sinking fund: money set aside monthly for a bill that comes yearly or irregularly
emergency fund: savings you can reach at once for unexpected costs, often three to six months of essentials
monthly surplus: what is left after essentials and wants

Watch out: Leaving out irregular bills. A budget built only from monthly bills looks fine for ten months and then fails when the insurance renewal arrives, often onto a credit card. Spread them across the year.

Spot costly debt and clear it fastest Everyday money

Compare debts by APR. Cards, overdrafts and payday loans are costly; clearing them is a guaranteed return.
Card interest is roughly APR ÷ 12 each month; minimum payments can take many years.
Pay a fixed amount that doesn't shrink, and pay every minimum.
Avalanche saves the most interest; snowball gives quicker wins. Choose the one you'll keep to.

APR: annual percentage rate: the yearly cost of borrowing, including most fees
costly debt: debt whose rate is well above what savings earn, such as most cards, overdrafts and payday loans
minimum payment: the smallest amount a lender accepts each month; often mostly interest
avalanche: repaying debts in order of highest interest rate first
snowball: repaying debts in order of smallest balance first

Watch out: Judging debt by the monthly payment. "Only 25 a month" sounds affordable, but on a card it can mean years of payments and interest larger than the debt. Always ask: what is the APR, and how long until it's gone?