A Quick Guide to Managing Your Finances
10 tips to keep your personal finances looking healthy
The world of personal finances can be confusing and overwhelming. If you have just started earning money for the first time, it can be hard to know what you should be doing with it. It can also be difficult to work out how to get yourself out of a sticky situation.
In this article, you will find 10 practical tips that will help you to improve your personal finances today:
#1 – Go through all your financial information
The very best thing you can do for your finances right now is to go through them with a fine-tooth comb.
You should work out exactly how much you are earning, spending, how much debt you have (if any), and how much you need to pay back each month.
After that go through exactly how much you are spending in all the different parts of your life. You may be able to cut some of your expenses – 1 less takeaway a week could save you $80 a month.
#2 – Cancel any unnecessary payments
While you are going through your accounts, you might find that you are paying for things you didn’t realize you were.
For example, lots of us forget to cancel free trials for online services and end up paying out to them for months before we notice.
There may also be a few subscriptions that you could go without, at least until you get your finances back on track. Go through each of the payments you are making every month and ask, what value are they adding to your life.
If they’re not adding anything then it’s time to say goodbye.
#3 – Don’t take our loans you don’t need
Lots of people make the mistake of thinking that taking out a loan is harmless, or that they are free money. When, in fact, they are the exact opposite.
Thanks to interest rates, when you take out a loan, you will lose money overall. This is fine when it comes to loans like mortgages. However, if you don’t need to take out a smaller loan, then don’t do it.
#4 – Pay off your debt using this method
Once you know how much you have to pay towards each bet every month. Make yourself a table.
Put your smallest debt at the top of the table, and the largest at the bottom.
Every month pay off the minimum amount on each dept, then put any extra you want to pay into the smallest debt.
When you have paid off the smallest debt, add the monthly amount you were paying for that debt onto what you are paying into your new smallest debt. Continue your process until you you have paid off all your debts.
#5 – If you’re in debt, ditch the credit cards
Some people can resist the lure of putting purchases on a credit card. If you find yourself in debt, then it is time to get real with yourself.
Are you the type of person who can use a credit card in a controlled manner? If not, then it is going to be better for you in the long run to ditch the cards. Then you will not be tempted to overspend, and you will start to see your finances perk up.
#6 – Set yourself money goals
You can’t make real progress in your finances if you have no goals.
Once you have worked out how your personal fund looks, you will want to sit down and set yourself some goals.
These goals might include getting free of personal debt, or paying off your student loan before you’re 30. You might want to start saving 25% of your income every month. Or you might have a big expense on the horizon that you want to save for (like a wedding, holiday, or house purchase).
#7 – Build your credit score
If you want to be able to get a mortgage with reasonable interest rates in the future or get better interest rates on your credit cards, then there is only one way you can do this – to have a good credit score.
There are many free online credit score checking resources, not only will they let you check your score but they will also help you improve it.
The better your credit score, the more likely you are to get loan requests approved.
#8 – Make sure you have your money in the right places
Do you have all your money in one bank account? Do you know what an ISA is? Overall, saving your money is good, but there are good and better ways to do it.
As well as having a current account, you should look into opening a savings account – this could be a traditional ISA, or something designed to help you meet a specific savings goal, like buying a house.
You may even want to look into opening an investment account, these can be a great way to earn money passively.
#9 – Plan ahead
Now, it’s time to sit down and look at your plans for the next 1-5 years.
Are there any big expenditures on your horizons? Like weddings, holidays, purchases, or are you planning to start studying? Whatever the event is, help your future self by preparing for it.
Start a savings pot for each one of these events, putting a little aside in each every month. By preparing for these events in advance you are less likely to get yourself into more debt or another tricky financial situation.
#10 – Start building an emergency fund
Speaking of being prepared. Nearly every financial expert we have spoken to or studied has given the same piece of advice.
The most important thing you can do for your personal finances is to create an emergency fund.
This fund should have enough in it (eventually) to cover all of your expenses for between 3-6 months.
This fund can then be used if you lose your job, or you have to make some unforeseen payout. For example, if your car breaks down or your roof collapses.
Knowing you are prepared for emergencies will help you to feel a lot more relaxed about your money.
