Deciding to create a habit for financial planning in order to achieve your goals is the first step in becoming financially savvy. Below we will discuss the rules to follow in order to plan your finances well.
Manage your money
The first step is to save. Sit down and work out all of your incomings and outgoings, are all of your outgoings justified in relation to your income? It’s great to have the latest phone on the market, but if you’re struggling to meet the £50/£60 a month bill on that device, in the long-term, is it worth it? Once you have whittled your expenses down to just the essentials plan what you could realistically put aside into savings.
They say that you should, if possible, save a minimum of 10% of your income every month. It can be that simple! But don’t put it in a piggy bank. Idle money in a piggy bank doesn’t grow. Put it into a bank account where you can earn interest on it.
Plan your expenses wisely
If you are living paycheck to paycheck and finding yourself struggling for money, there are a few things that may be able to help.
Try preparing a budget. A budget will help you to control your cash flow and can show you how much money you have coming in and how those funds are spent. Start by categorising your expenses into the following categories:
- Fixed and variable
- Urgent and non-urgent
- Necessities and luxury
- Avoidable and unavoidable
Wisely manage your debt
Lack of debt management may eat up a major part of your paycheck. You may end up borrowing more to pay off old loans.
Work out how much you owe, and to whom. Chalk out a schedule to pay them off. In case you have a lot of debt to shoulder, start paying off the most expensive one first.
The most expensive form of debt are credit cards, as soon as your salary each month, pay off your credit card balances in full. Don’t fall for the lure of paying off the minimum balance and end up facing further charges.
