Tips to take back control of your finances
Money is a topic of conversation which many UK adults shy away from. Talking about difficulties meeting payments or taking out loans can be seen as a source of shame, but support is out there. Whether you speak to debt professionals or confide in family and friends, remember that the average UK household owes £65,777 on average, so you are not alone.
Here are some tips to help you realistically improve your finances.
Assessing your current financial situation
Before you can make any changes, you need to examine your current situation thoroughly. Set aside a specific evening or chunk of time during the day to prepare, having copies of bank statements or online logins ready.
It may be difficult to do, especially if you have been ignoring the situation for a while. Start by making a spreadsheet comparing your income against your outgoings. This helps identify unnecessary spending and where you can streamline payments.
Implementing a budgeting system
Once you have a strong understanding of your current situation, you can begin to think about your budget.
First, make a note of your essential payments. These are non-negotiables such as rent or mortgage, energy bills and insurance. Once you have ringfenced these funds, you can look at your debts and savings. Work out how much you can afford to put towards both of these pots whilst still being able to live.
Exploring debt management options
If you are finding your debts unmanageable, take some time to consider your options. One route you could take is to consolidate your debts into a single repayment plan. Debt consolidation loans can simplify your payments into one monthly obligation and potentially lower interest rates for some of the debts as well.
Debt Management Plans may also be a good choice if you are struggling. Working with accredited professionals to contact all of your creditors helps you to arrange smaller payments through the company itself.
Building an emergency fund
Once you are able, you should consider setting up an emergency fund which is separate from your savings account. This is for when things go wrong, such as your washing machine breaking down or your car needing expensive repairs.
Having a financial cushion can help you in the future as you will not have to adjust your budget for these scenarios or take out loans to cover the costs.
If you are still strapped for cash, start small. Putting away £25 per month would leave you with £300 after a year, which is enough for a new washing machine, at least! Over time, as your emergency fund grows, you can taper down your payments until you need to withdraw money.