If you’re looking for ways on how to manage your money, or you’re struggling to pay off multiple debts, then you have come to the right place.
Your years in school are spent learning algebra, close reading, carrying out chemical experiments and being able to name the popular cities of Spain, but nobody teaches you how to keep your finances under control.
According to Halifax, 55% of savers across the UK have saved between £1 and £50,000 for their retirement. However, you need at least £200,000 overall in your pot to have a stress-free retirement.
Remember, your spending habits affect your credit rating and determine whether you end up in debt. If you want to remain or become debt free, plus increase your chances of having a comfortable retirement, it would be worthwhile scrolling through this page.
BUDGET
This is the best way to manage your money, along with keeping your spending habits under control. It’s highly common for people to spend more than what they earn, reason why thousands of people in the UK end up in debt.
Although budgets may seem a little perplexing, they can be a great financial tool, especially if your living from paycheck to paycheck.
The best way to kick start your budget is to track your spending. This will give you a rough idea as to how much you’re cashing out every month. You can do this by saving receipts, looking over your bank statements or even just taking note of what you spend.
Do this for one whole month. When the last day rolls around, sit down and review what you spent. Make a list of every expense you paid for that month, it should look something like this:
Income: £2,500
Expenses:
- Mortgage/Rent: £600
- Household bills: £200
- Groceries: £320
- Savings: £200
- Emergency fund: £200
- Daily coffee: £60
Once you’ve done this, look over it. Are there certain areas you can make cut backs? Understanding what expenses you don’t necessarily need are crucial for managing your money.
Next, you will create your budget. Based on the expenses from the previous month, you can use this as a guide to separate your primary payments to your secondary payments. Always be honest with yourself when writing your budget. Never make estimates, be realistic.
GET OUT OF DEBT
Debt can have a massive influence over our lives. It requires sacrifice, commitment and can also be quite demanding. One of the major reasons why people struggle to clear their debt is simply down to one fact:
It sucks!
Paying off your debt takes time, depending on the total amount you can put towards it every month. It’s advised, no matter how stressful it can sometimes be, to overpay your debts. This will cut down the repayment period significantly, meaning you can get out of debt faster.
The most important thing to think about when becoming debt free is the future. Borrowers tend to become highly impatient, which is understandable. Nobody wants to wake up every morning knowing they owe money to someone.
By making some life changes, you can pay off debt even if you’re broke. Here are some ways to get out of debt fast:
- Stop building more debt: it’s known for people to get into more debt when trying to pay it off, normally due to applying for credit cards. You won’t get anywhere by doing this. If your credit cards are the reason for slowing down your route to freedom, get rid of them. If you’re feeling brave, cut them up. This will reduce temptation and help you to focus on your debts.
- Avoid paying the minimum: if you want to clear your debt faster, try to put as much money as you can towards your monthly repayments. Just a few pennies can make a dramatic difference!
- Stick to your budget: the best way to pay off debt is to manage your money, this is where your budget comes in. Knowing what you have coming in and going out every month will help you identify areas where you can free up money and put it towards your debt.
- Downsize: the important thing to remember is, being in debt is temporary. You won’t be in it for life, so it would be worthwhile going the extra mile and downsizing to a smaller house. This can save you thousands of pounds and in turn, pay off debt quicker. Once you’ve cleared it, you can easily look for a bigger property.
- Bye goes the clutter: as Clark Howard says, “sell your crap”. If you have valuables in your home which you no longer use or want, sell them. There are plenty of sites out there such as Amazon, eBay and Gumtree which can make you heaps of cash for your items.
GET ADVICE
If you’re debt becomes too much to handle, to the point where your struggling to make the minimum payments, then it would be a clever idea to speak a professional. There are debt advisors at your disposal who can offer you free advice and guide you in the right direction.
If you have multiple debts, you may be advised to take out a consolidation loan. Now, there are many misconceptions when it comes to loans, as majority think they’re getting themselves deeper into debt. This is very far from the truth!
Debt consolidation exists to help you with your debt, not amplify them. The idea is you merge all your debts together, including credit cards, overdrafts and other borrowing. You pay them off with a loan, meaning you only have to make one repayment every month.
The benefit is:
- You can access cheaper interest rates.
- Keep on top of your finances.
- Longer repayment period.
- Takes stress of your shoulders.
Keep in mind, if consolidate your debt with a secured loan, you must offer up an asset as collateral. However, property repossession is highly complicated and happens a lot less frequently.
SPEND LESS
Everyone knows the best way to manage your money is to reduce the amount you spend, yet barely anyone seems to take up the advice. The common denominator when trying to spend less is temptation. With so many deals being offered by companies, it can be hard to resist buying an item and getting one free.
With that in mind, here’s a few ways you can save money effortlessly:
- Pack some lunches: how much do you spend every day on your lunch? Studies show a worker can spend an average of £5. This is around £1,300 annually! Making your lunches will save you thousands, literally.
- Switch your bills: According to GOV.UK, households across Britain can save up to £200 by switching energy supplier. It’s highly worth considering.
- Use cash: opinions on this method vary, but if you spend more with your card, take out a certain amount of cash for the week. This can help you to not overspend. If you find you spend more with cash, stick with your card.
- Booze is bad: do you love a good drink every night after work? Did you know this is costing you over £100 per month, potentially £1,000 by the end of the year? No need to say more.
- Switch bank: Martin Lewis, founder of Money Supermarket and finance guru, revealed that customers can earn up to £200 simply by switching bank provider. By regularly switching banks throughout the year, you can earn up to £1,000!
- Couponing: if you love a good bargain, you can join the coupon army and save £100s up to £1,000s. Back in December 2015, one extreme couponer paid £1,200 shop with coupons.
- Remortgage: many are hesitant to do this, but you can free up £1,000s a year if you switched from a standard variable to a fixed rate.
BEST MONEY MANAGEMENT APPS
If you need a bit of help to manage your money, stop whatever it is you’re doing and download these apps pronto!
- Money Dashboard: Available for both iOS and Android users, the app allows you to connect your current accounts, savings and credit cards all at once. It’s completely free too!
- Squirrel: This app allows you to spend your income without running out of money entirely. You basically set up a separate account for your salary, which is run by Barclays, who will then release money into your current account. It will give you enough for your bills, savings, plus other expenses. There is £3.99 fee included.
- Chip: Handy if you’re looking to put money aside for your savings. Once you’ve connected your banking account (must be online), the app analyses your data to identify how much you can save. It’s entirely free.
- Moneyfarm: If you’re looking to invest, then this is the app for you! The aim is to open an account and begin investing, all within 10 minutes. You will be presented with a questionnaire when you sign up and determines which of the 6 investment portfolios you’re suited to. The app is fully regulated by the FCA, meaning your money is protected.
