We live in times of economic uncertainty, and that means most of us are trying to save cash and keep on top of our finances where possible. Of course, there are certain costs that we simply can’t hide away from, such as mortgage repayments and bills, but there are ways to manage your finances and be responsible with your cash. That doesn’t mean you have to avoid holidays or splashing out on other luxuries from time to time, but following the advice laid out in this article can certainly help.
Luckily, there are many modern tools and methods that you can utilise to manage your finances effectively. Besides, it’s a good idea to have some cashed saved for a rainy day. You might think that there’s no way you could possibly get a loan if you already have a bad credit rating, but there are ways you can borrow money without turning to the bank. If you know somebody who trusts you to maintain your monthly repayments, you could look into getting a guarantor loan. An example of a guarantor loan can be found here for those who might be interested in such an option. Now, let’s take a look at what you can do to manage your finances responsibly.
Set a Budget – and Stick to it
It’s surprising how many people choose not to stick to a budget in order to save cash and manage their finances responsibly, but it’s not a great idea to simply live from paycheque to paycheque spending everything you earn. Additionally, sticking to a responsible budget can help you save the money required for nice holidays, new cars and even a deposit on a new home.
To get started, you’ll need to calculate what your expenses are each month, i.e., the unavoidable costs. These include the following:
- Your mortgage repayments
- Transport fees for work and school purposes
- The total cost of your utility bills
- Financial costs such as insurance
- Tax payments
The items listed above apply to most people, but there may be other costs you simply can’t avoid as well. Once you know how much you need to spend every month, you can start to think about what your budget might be.
Set Goals for Yourself
Of course, after you’ve worked out your budget and know how much you could potentially save on a monthly basis, you’ll probably want to set some targets for yourself. It’s important to be realistic about how quickly you can save, but setting goals is a great way to help you stick to your budget. You could think about what kind of things you might like to pay for, such as a dream holiday, and set your target to save the amount of money required.
You might also want to set the goal of paying off credit cards and eliminating debt, but we’ll talk a little more about that in the next section. More advice can be found here with regards to setting budgets and making targets.
Getting Rid of Debt
Most of us are in some form of debt, whether it’s due to mortgages, bank loans, credit cards or even store cards. Some debt, like mortgages, aren’t always a bad thing, but you’ll want to pay off bank loans and credit cards as soon as possible if you don’t want debt to spiral out of control.
Needless to say, it can be very difficult to try and eliminate all of your debts at once. The best advice is to try and pay off whatever has the highest interest rate while still ensuring you cover the minimum interest payments on all your debts each month. Typically speaking, store cards have the highest interest rates, especially when compared to personal loans, so they might be a good starting point.
Debt can cause us to experience an overwhelming amount of stress on a constant basis, and all that stress can have negative effects on your health. If you manage your finances responsibly and set realistic goals for how and when to eliminate your debt burden, you’ll probably find it’s much easier to feel relaxed and catch a good night’s sleep. Remember, finance tools are a great help when it comes to planning your budget and setting targets, and many of them are completely free.
Try to Identify Areas where You Could Spend Less
While setting a budget is important, it’s also vital to see which of your unavoidable costs could be reduced by simply changing your lifestyle. For example, you might be an avid car lover, but do you really need a sports car with a three-litre engine to drive around town? Many people choose to spend an overwhelmingly large proportion of their salary on their vehicles, and often unnecessarily.
If you sold the car you pay for via monthly payments, you could opt for a second-hand eco-friendly vehicle that you might even be able to cover the total costs for up front. In addition, you’ll see your tax, insurance, and petrol costs tumble, and that’s going to help your budget tremendously.
Take Advantage of Free Money
Needless to say, free money is difficult to come by, but by this we mean you should jump on the opportunity to squeeze your employer for the maximum amount of pension contributions. Almost all employers will match the percentage of your salary you pay into your pension and add it to your pension pot. In addition, maximising your pension contributions could lower your taxable income. Find out what the maximum amount is that your employer will contribute to your pension and make sure to take advantage of it.
Managing your finances doesn’t mean you have to stop living your life, it just means you have to be responsible with your spending and avoid debt wherever possible. You’ll undoubtedly feel better about life when you’ve got a decent amount of savings in the bank.