A Beginner’s Guide To Better Financial Management

Managing Your Money So It Doesn't Manage You:

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Taking the time to manage your finances better can really pay off (pun intended). It can help you stay on top of your bills and save thousands of pounds each year. You can use this extra money to pay off debts, put them towards your pension, or (if there is quite a bit left over) spend them on a new car or holiday! We will discuss some money management tips, including how to set up a budget, sticking to it and how to save.

How To Set Up A Budget:

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Arguably, the first step to taking control of your finances is making a budget. Although It takes some effort, it’s a great way to get a quick overview of the money you have incoming and outgoing.

Setting up a budget means you are:

  • Less likely to find yourself in debt
  • Less likely to be caught out by unexpected expenses
  • More likely to have a good credit rating
  • More likely to be accepted for a loan or mortgage
  • Able to spot areas where you can save money
  • In a better position to save up for a new car, or maybe even a holiday!

What You Need:

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Over half of UK households keep a regular budget. Most say it gives them peace of mind about how much they are spending, and makes them feel better about life in general.

To get started on a budget, you have to work out how much you spend on:

  • Living Costs
  • Household Bills / Expenses
  • Insurance
  • Gifts for Family and Friends
  • Travel Costs (Public Transport, Car, Petrol)
  • Leisure

There are some great free budget creator tools out there online, alternatively you can set up a budget using a spreadsheet - or just write it all down on paper (just make sure not to lose it!)

There are also some great free budgeting apps available and your bank might have an online budgeting tool that can take the relevant information directly from your transaction history.

Getting Your Budget Back In Balance:

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If you’re spending more than you have coming in, you need to work out where you can scale down. This could be through small steps like cooking your lunch at home, or cancelling that extra TV subscription you don't really use.

You could also keep some sort of spending diary and write down everything you buy weekly or monthly. Often we spend on our cards without actually realising how much overall. Alternatively look at last month's credit card statements at the end of each month.

Get The Whole Family Involved:

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Sit down together and make a budgeting plan that you can all commit to.
For many families, a lot of the money can go on unnecessary bills - try and get everyone to keeps the windows closed in winter when the heating is on, and not leave lights on when we leave the house. Work out how much spending money is left after the essentials, and decide how much you can save and what is left to spend.

You can also save by shopping around for a new mortgage, or making adjustments to your existing plan.

Flexibility:

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Bills can go up in winter, school holidays can be more expensive, and maybe unexpected circumstances will require you to review your budget more frequently. This all becomes easier when you are organised and know exactly what your basic monthly expenses are.

Make sure to try and leave some wiggle room in your budgeting so you don't find yourself in a situation where you cannot draw from next month's budget if you have a difficult month before.

Paying Off Debt & Loans:

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If you have any debt or loans it would make sense to work out which one charges you the biggest interest rate, then try to pay that off first.

Having said that, its important not to break the terms of your loan agreements.

Even if you’re focusing on paying down a specific high interest debt, you should make sure to at least cover the minimum required on any other debts you may have as to not incur any unexpected fines or problems.

Savings Goals:

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Everything becomes easier when we set ourselves a goal - saving money is no different. Firstly we have to make sure we have some emergenc savings put aside that we can rely on in an unexpected emergency like being laid off or a siblings hospital visit.

A good rule of thumb is being able to save enough for 3 months of expenses if you are unable to work - generally this could be a goal for many of us. If you can't do this straight away, even more reason to make this a longer term goal. You can keep this in a building society or separate savings account so that you are not tempted to spend it.

As your savings start to grow, you might consider:

  • Putting more money into your pension. It’s a great way to take of yourself in the future.
  • Perhaps make an investment plan based on your personal needs/goals and the time frame you have in

Being Overwhelmed:

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Its often the case that we shy away from our bigger issues and deal with the small ones right in front of us. It sometimes easier just to not open the letter containing the bill than it is to stomach reality.

How can you begin to eat a meal the size of your house? One bit at a time.

Once you start getting organised and taking small steps to paying off your debts, however miniature they may seem - they will eventually lead you out of the difficult situation and into some peace of mind.