We hear from so many of you wanting help and tips when it comes to your financial matters. If your goal this year is to get your finances in order, you’ve come to the right place. Here, we take a look at what you do to help improve your financial position this year.
Take an honest look at your current financial status
Whenever it comes to money matters, it’s really important to take a look at the big picture, and that often means, going back to basics. You’re going to have to be really honest with yourself and your current financial position and be sure to look at your finances as a whole. Ask yourself the following questions:
- Do you have more money coming in than going out?
- After bills, where and what are you spending your money on?
- How is your pension looking- how much will you have to live on per year?
- Do you have any savings? Are you recouping any interest on them?
- How much debt do you have and where is it? Look at overdrafts, loans, store cards and credit cards.
- How much interest are you paying on your debts? It may also be helpful to look at how much money it is costing you per month as opposed to just the percentage which won’t seem like a lot.
Determine what changes need to be made
When you’ve got a clearer picture of what your current financial status is, consider what goals you need to strive towards. Consider the following:
- Do you have a lot of debts? Or debts with high interest rates?
- Do you need to build up your pension?
- Do you need to cut down on your outgoings?
- Do you need to create a savings pot?
Once you’ve got a clear picture on where the issues lie and the possibilities on where you can make sacrifices, cutbacks or areas for improvement, you need to work on the plans to tackle them.
Make a plan to tackle your financial goals
Often there is no quick fix when it comes to improving financial matters, it takes time and can often mean having to make sacrifices until they improve, but it is worth the time and effort.
Firstly, it’s really important to realise that you may not be able to tackle all of your financial goals at once; you’ll likely need to prioritise them. You’ll need to consider what is causing the greatest impact and create a plan to sort it. For example, if you have a lot of debt and are paying high interest rates (credit cards, payday loans etc.), you’ll want to tackle these first as the interest payments alone could be money you use towards saving for a family holiday, a new car, or moving house for example. You could pay as much as you can per month to bring this down as quickly as possible or look at transferring the balance to a 0% rate- subject to affordability and transfer fees. Take a look at the Money Supermarket credit card calculator to see how much that interest you’ll pay over the life of your credit card and how quickly you can pay it off, based on what you pay in now, and look at what it does to the terms and total interest paid if you pay more in each month. The results are staggering.
Secondly, it’s really important to bear in mind that there are bound to be things that crop up that mean you may not meet your monthly goal. For example, the car could break down and you’ll need to divert some of the funds to pay for that. If you’re prepared and almost anticipate a glitch in the plan, you’ll not feel as demotivated if and when it does happen. Always ensure you’re making your minimum payments to avoid any impact to your credit score and rating. The next month, pick yourself up, dust yourself off and do what you can to meet your targets.
Thirdly, you’ll need to constantly check in and adjust as needed. Things are constantly changing, interest rates go up and down, expenses are forever increasing at the moment, you may get a change in income. Stay positive, keep making strides and it will pay dividends- in some instances, quite literally.
As and when you meet one of your financial objectives, identify the next area for improvement and start all over again.