With the UK working to recover from the COVID-19 pandemic while battling an ongoing cost of living crisis, it’s never been more important to get on top of your personal finances. The future might still be uncertain, but having them under control can help you move your financial situation forward with greater confidence.
In fact, learning to manage money better could help you stay on top of household bills, direct debits, car insurance, spending habits, save more and feel better about everyday decisions. It’s easier said than done, of course, and won’t happen overnight, but with some planning, practical steps and perseverance, and debt advice you could soon put yourself in a better position.
Knowing where to start can be the hardest part. Below, read how to start money management of your finances more effectively.
Creating a Budget
Making a budget is the first step towards managing money better, giving you a snapshot of what’s coming in and out. A solid budget makes you less likely to get into debt and more likely to save on things that matter to you.
Use an app, spreadsheet or simple pen and paper to note down your income and essential and optional outgoings, from bills and food to leisure and living costs. You’ll understand where your money’s going each month and how much you’re left with or in debt.
Reducing Your Outgoings
Making a proper budget should show you if there’s anywhere you can cut back. For example, are you spending beyond your means on travel, food or clothes?
Research shows we spend most of our budgets on rent or mortgage payments, but there are plenty of other categories to reduce spending in. You could find cheaper mobile phone and broadband deals, such as using fewer utilities or more affordable transport methods.
It’s normal to have some debts, like a mortgage, and consistently repaying the right types can help build your credit score. But clearing the problem will take a load off your mind if you have lots of debts.
It usually makes sense to target those with high-interest rates first. If simply paying them off is beyond your means, you could borrow money with more security and get a lower interest rate, helping you swap the high-interest debt for more manageable repayments.
Growing your savings is critical to giving you financial freedom and reassurance.
With your outgoings reduced, aim to allocate a realistic portion of the money to monthly savings, such as 10% of your income. Opening a dedicated savings account will then help you keep this money separate. You can set up automatic payments that repeat each month, taking the hassle out of saving.
Having specific savings goals in mind, such as a house deposit, car or gift, could make you more motivated to save.
Even with everything going on in the world right now, could these practical money management tips help you get your finances in order?