The Office of National Statistics (ONS) reports that households in the U.K. are increasingly experiencing stress involving their personal finances. In 2017, the average household had roughly £900 more outgoing than they received as earned income. Approximately 53% of those between the ages of 22 and 29 have no money saved. Many factors contribute to this trend including rising prices for consumer products and services, stagnant wages, and rising debt. Money management begins with assessing your current financial situation and forming financial goals. Keys to success include creating a budget, establishing savings goals and other best practices. Response Funding Limited is a U.K. based provider of short-term personal loan products that is a resource for many consumers. Let’s discuss some of the ways to improve your financial outlook.
Analyze & Organise Your Financial Situation
The first step is to accurately and honestly look at your overall financial picture. This will involve identifying your income, monthly expenses, debts, etc. Having this information organised is critical in formulating your plan. If you are married, it is important that both of you are open to improving your financial condition. This is a great time to consider consolidating separate accounts in order to simplify and more easily manage your finances. You will also want to have a central location for the summary of your joint finances that is accessible to both of you. Develop a financial summary, which will be transitioned to your budget, in a spreadsheet. Another option is to use a budgeting tool from your bank or sites such as Mint or Quicken.
Track Your Spending
It is critical to begin compiling a detailed listing of how your money is being spent. This is important because ultimately you will want to reduce this spending as part of your strategy. Many of the ways that you spend money may not immediately come to mind. You may want to keep a log for one-month to track all the ways that you spend. Your monthly bills should be clearly organised within your summary. Review your checking account and credit card statements for any automatically paid bills. Check all debit or credit card usage that you may have overlooked.
Identify Wasteful Spending
A primary key to better money management involves making sacrifices. You will need to clearly identify expenses that you can eliminate. Daily habits and routines that seem minor can really add up over the course of a month or year. Some of the most common include the following:
- Trips to the coffee shop
- Buying drinks or snacks from convenience stores or from vending machines where you work
- Buying lunches
- Going out for drinks
- Entertainment subscriptions or premium television packages
- Tobacco products
- Gym memberships that you do not regularly use
- “Impulse” buying either in stores or online
Seek Opportunities to Lower Costs
After identifying and eliminating some of your wasteful or unnecessary expenses, it is important to determine how to reduce what remains. Create a list containing other expenditures such as utility companies and mobile phone providers. Review your account statements and see if you are paying for any unneeded extras. Consider alternate options you can switch to. In addition, contact these providers and ask them how you can reduce your bill. Consider informing them that you intend to switch to a competitor and see if they will offer you a better deal.
Two key expenses to consider are transportation and child care. Those with a daily commute should consider money-saving transportation options. If you are paying for costly child care, consider whether you have family members who would provide care once or twice a week. Visit the gov.uk website to look at a recent program that has been implemented. A “tax-free childcare scheme” has been developed that you may be eligible for.
Stop Accruing Debt
An ONS report recently suggested that U.K. household debt is potentially worse than any other time in recorded history. It is critical to transform your approach to debt. Financing a large purchase such as a home or a car is understandable. These are items that you would unlikely be able to afford to buy outright. Using credit such as for in-store financing should be reduced significantly. This applies to gifts, vacations and any non-essentials. Borrowing creates more interest that detracts from your income. These funds are better allocated to pay off existing debt or should be placed in your savings.
Establish a Plan to Eliminate Existing Debt
All of your existing debts should be reevaluated. One key is to reduce the interest rates you are paying. This will be a key component of your new budget. Consider some of these potential options:
- Consolidation: Consider a debt-consolidation loan that will allow you to merge higher-interest debt into a loan with a better rate.
- Transfer: Look to transfer balances from high-interest credit cards to those with special rates for balance transfers. There are offers you can take advantage of that offer zero interest on balance transfers for 19 months.
Prioritise: Focus on paying off your debt with the highest interest rate first.
Seek Opportunities to Boost Income
Thus far, we have discussed the elimination of wasteful spending, lowering remaining expenses, and reducing the rates of interest on debts. Next, you should consider how to boost the level of your existing income and/or create supplemental income. You should consider selling items that you no longer need online. Look for part-time jobs either locally or remotely.
Create Your Budget
The development of a new budget is necessary. This is essentially your “game plan.” Your strategy will continue to evolve as you move forward. Remember to direct the majority of your available funds to pay off any high-interest debt you have accrued. These debts tend to include credit cards and student loans.
In the beginning, you will want to create an emergency fund that can be used instead of credit for unforeseen expenses. Once you have made progress in paying off your debt, you can take a more aggressive approach to saving money. As you build your savings, you should consider a long-term savings plan as well. This may be best created with assistance from a financial professional.
Personal Loans From Response Funding
Response Funding Limited provides quick loans to those in need of cash. We are a direct lender that operates in accordance with the regulations of the Financial Conduct Authority. The application process may be completed online at your convenience. You may be able to receive the funds you need the same day you apply. Unlike many lending options, our loans are short-term and require no long-term commitment. The interest charges are clearly disclosed to you. Even those with less-than-perfect credit are encouraged to consider applying today.