Personal finance refers to each and every individual and how they handle their money. This can cover their income, spending, and investing. Knowing how to keep on top of your Personal Finance and planning for a rainy day is key to getting into good financial habits.
More consumers in the UK are relying on credit or debt to help them survive. However, for many, this can pave the road to being dependable on debt and never paying it off. The financial tips below are here to help consumers like you get a better idea of how to manage your personal finances effectively.
1. Have an emergency fund:
An emergency fund is an important tool and can be helpful if you need to fall back on it. Depending on what you want from your emergency fund, your savings goal will differ.
Some people strive as far as having a fund that will cover them if they are unable to work for a few months or your emergency fund can be as small as you like. Whatever your goals are for an emergency fund, it can be a useful tool to have, and it can be a good idea to have this separate from your savings account too.
2. Be financially disciplined:
Getting carried away with spending can happen from a young age, especially when you’ve just started getting some money for yourself. However, being financially disciplined can be the easiest way to stay on top of your Personal Finance.
This doesn’t mean you have to scrimp and save each and every penny you get but instead, you should assess the spending and decide what is actually needed. Think of unnecessary spending such as your daily coffee from the shop which could easily be made at home or that gym membership you’re paying for and never use.
3. Only reply on car finance if you need to:
Don’t get us wrong, adverts for car finance with no upfront deposit or low monthly payments can be attractive and an easy way to break down your car costs. However, car finance is attracting more and more drivers who can’t afford to pay for their car outright and increasing the amount of debt they owe.
Once they’ve secured finance, it then turns into a rolling cycle of new cars on new Personal Finance deals with never being able to own a car. It can be much more cost-effective to use your savings account to buy a car and own it outright, with no mileage limits or interest fees to pay.
4. Automate your bills:
The best way to stay on top of your Personal Finance is to set up direct debits to collect any bills or debts you owe. This can include any energy bills, mobile phone contracts, mortgages, car finance, and credit card payments which need to be paid on time and in full.
Failing to do so, can have a massive impact on your credit score, and your financial life and affect your ability to borrow in the future. It can be a good idea to set your direct debit payment date to the day after you get paid from your employer to make sure payments are never missed.
5. Monitor your credit score:
Many people underestimate the impact a credit score has on their financial life. When you apply to borrow money, lenders will want to know how you’ve handled credit in the past, and missing payments or having high levels of debt can negatively impact your credit score, A lower score increases the risk to future lenders, and they may even decline your application on this basis.
A better credit score can also give you access to better Personal Finance rates and save you money. It’s a good financial habit to check your credit score once a month and see the factors listed on your score that are holding you back or could be improved upon.
6. Use a budgeting tool:
Budgeting tools are key for keeping on top of what you’re spending. You can input your earnings by using your bank statements or payslips and then factor in your outgoings This should include any bulls or debts you need to pay off and also how much you want to put in your savings account, you can then see how much you have left over for yourself and your social activities and make sure you’re never over budget.
7. Focus on paying off your debt before taking on any more:
Whilst having credit isn’t a bad thing and having a healthy mix of credit can actually help to improve your credit score. Credit can only become a problem if you miss payments or have high levels of debt. Keeping credit usage low and manageable is key to a healthy credit score. Before you consider taking on any more Personal Finance or credit you should try to pay down any credit you currently owe before taking on any more debt.