It’s really easy for your personal finances to become tangled up without you even realizing it. Being good with money is so much more than just making ends meet, it’s about making sure that you’re prepared for the worst-case scenario, should it ever happen, and making sure that you are able to live your life, rather than spending your time worrying about outgoings.
You don’t need to be a math genius to look after your personal finance, but life is much easier to manage if you have even a basic understanding of financial skills – even just simple addition and subtraction is enough to keep your finances in check.
If you struggle with money management, for example, if you’re living from paycheck to paycheck even though you earn plenty of money, you need to take responsibility for your personal finance.
Remember that just because you have money there, it doesn’t mean you can make purchases all of the time. If you struggle with keeping your personal finance in check, then here are some ways in which you can manage your money better.
Set up a budget
A lot of people don’t budget because they don’t want to commit to what they think will be a boring and time-consuming process of listing expenses, adding numbers and making sure that everything lines up.
If you are bad with money management, then there are no excuses for not budgeting as it will really help you come to terms with your ingoings and outgoings.
If all it takes is just a few hours a month for you to work out and track your budget, then this will completely change your spending habits for the better.
Instead of looking at the cons of creating a budget plan, instead, look at the positives which budgeting will bring you.
Pay off loans and credit cards
If you have loans or own chunks of money on credit cards, then it makes sense for you to pay off these debts, especially if they come with high rates of interest or large minimum repayments.
You also need to make sure that you don’t break the terms of your credit agreement so that even if you’re focusing on paying off other debts, you are paying at least the minimum on other cards and loans.
Invest in the future
If you own your own home, then investing money into it is a great way to secure your future finances and improve your way of living. Carrying out renovations and upgrades to your home is a great way of increasing your future resale value and also makes your home more appealing to live in.
If you’re making big investments that cost a relatively large amount, then it may be better for you to take out a short term loan, such as a bridging loan, to keep your finances secure.
With this type of loan, you are using the money to pay off a large amount of money in a secure way, which you can instantly repay if you have the funds to remove any charges or interest being added to other repayments.
Don’t commit to new monthly bills
Just because your income and credit score means that you qualify for a loan or new purchase, this doesn’t mean that you should approve it.
A lot of people naively believe that the bank won’t approve a credit card or loan if they can’t afford it, but the bank only knows about the income which you’ve reported to them and any debt obligations which are included on your credit report.
It is completely down to you to decide whether or not a new monthly payment is affordable, based on your income and other financial obligations. If you struggle to budget, then taking out a new loan or credit card may not be the best idea.
Give yourself a limit for unbudgeted spending
A hugely critical part of your budget comes down to your net income and the amount of money you have leftover once you take your expenses from your income.
If you have money left over after you have paid your bills and outgoings, then this is money you can use as and when you wish, but only up to a certain amount. This is known as unbudgeted spending.
Try not to overspend, especially if you need to make it last the entire month. Before you make any purchases, be sure that it won’t interfere with any other things that you have planned. Set yourself a limit for purchases such as clothes, takeaways and weekend activities and try not to go over it.