Managing Your Finances
Are you struggling to stay on top of your finances? Are you living beyond your means? Are you desperate to save up for a holiday?
Managing your finances may seem like a daunting and overwhelming task but taking the time to sort your accounts could save you money and stress in the future as well as preventing debt issues further down the line. (And allow for a break away in the sun here and there too!)
Having a better understanding of where your money goes each month will not only help you to feel in control of your finances, but also put you in a better position both physically and mentally. Follow these 3 simple steps below for a quick and easy financial detox!
- Create a Budget
Do you know off the top of your head how much you spend each month? Not many people do! It’s important to understand where your money goes and if it’s necessary. Take the time to look through your bank statements and make a note of how much is spent in each category e.g bills, food, travel, leisure activities etc. This should highlight the areas where you are overspending and allow you to set yourself budgets. Maybe you need to cut down on meals out or limit your trips to the local coffee shop, you’ll thank yourself for this later. A popular way of setting a budget is the 50/30/20 method, meaning 50% of your monthly income goes towards necessities such as bills and food etc, 30% goes towards ‘wants’ such as holidays, leisure etc and 20% goes into savings. This could be a good place to start when creating a budget and will create a good guide.
- Consolidate Debt
Loans, overdrafts and credit cards have a way of piling up and getting out of hand quickly. This can affect your credit score which, in turn, can affect you getting jobs, renting a property, or getting a mortgage. Once you’re in debt, it’s hard to get out – but it’s not impossible. The first step is to consolidate your debt – work out the total amount you owe and try to put it in as fewer places as possible. Take the time to explore different loans and credit cards to find the best interest rates, making sure you pick realistic time frames to avoid any underpayment charges down the line. Make sure the monthly repayments are comfortably affordable, as missing payments will only decrease your credit score further. If you work offshore, it’s a good idea to open a foreign bank account, this will help save on bank charges and exchange rate loss. Research or speak to your accountant for the best advice.
- Save, save, save!
Learn to see your savings account as a bill that is paid monthly. When you pay money into your savings account just after payday, you treat it as importantly as you would a bill. You can even set up a standing order to do this automatically. This way you get used to the money coming out and won’t be tempted to dip into it again throughout the month. As with debt payments, this needs to be set at an amount that is realistic and comfortable. Also try limiting your monthly outgoings; shop around for better phone contracts and Wi-Fi deals etc. When it comes to household bills, contact other providers and compare. Even if there’s not a huge difference in price, every penny counts. When trying to save money, set yourself goals, short term and long term. It’s easier to save when you have something to work towards.
There are lots of useful websites to help get your finances in order, here are a few offering valuable advice on debt, savings, mortgages, credit scores, pensions, household bills and insurance.