If we're honest - we could all use some extra advice when it comes to our personal finances...
1. Budgeting
The first step to mastering your personal finances is to set yourself a budget. A budget sounds boring and restrictive but is crucial as you need to record money coming in (salary, pensions or benefits) versus money going out (rent or mortgage payments and other expenses).
Your budget will need a little research before you start and may need to be adjusted as you go; track your income and bills for a month without making any changes to your normal spending habits and payment of bills. By the end of the month you’ll have a good indication of your ‘regular’ spending and expenses. You’ll also see how much money you have left over, if any! Why not use our online budget planner?
2. Where you spend your money
Once you’ve compiled your monthly bank statements and all of your receipts, it’s time to compile a list of all your expenses for the month and categorise them in a way that makes sense to you i.e. household bills, financial debts, travel, food etc. Be sure to spread out any expenses that span over several months, such as a quarterly gas bill, for example.
Start to consider which expenses you can live without and where you can potentially make some savings. Would you consider living at home to save on rent? Cooking more meals at home and eating out less often?
3. Managing your debt
Like many of us, much of your financial outlay can go towards paying back high interest debt. If this is you, ignoring the growing mountain of letters from the bank won’t make the matter go away!
Sit down and carefully record all of your debts, work out how much you owe and how much you have to pay each month. Then look at how you can start to reduce these debts as quickly as possible.
A good place to start is to limit your credit card spend and pay them off as quickly as you can. Credit cards interest rates are high and you’ll find that you might be just paying the interest each month.
4. Be honest
Be honest and don't lie to yourself about what you spend or earn each month. Don’t be afraid to ask a friend or family member for help or, if things start to look even less rosy, seek out expert advice from an independent source.
Remember there are many people in a similar boat - so don’t bury your head in the sand.
5. Start saving
So you’ve set a budget, tracked all of your financial income and outgoings, worked out how you can cut your spending and are managing your debt. Now it’s time to see how much you could save.
The aim is to save as much as you can by setting realistic goals and sticking to them. Set the money aside or make it as difficult to spend as possible; try bringing a set amount of cash out with you instead of your credit card.
Saving will bring you closer to your future goals whether they be travel, a new home or a new car - but they will also provide you with peace of mind. By having those savings, you cover yourself in the event of unforeseen circumstances.
