Okay, I have a little bit of experience in worrying about my finances and I am sure that I am not the only person on earth that feels like that.
In fact, I would love to be able to wave a magic wand and set all of my credit history back to zero. Oh the things I would tell my 16 year old self.
It’s just not going to happen though, is it?
The one thing I have learned though, is that it is never too late to improve your money situation and all you need to start is just a few financial details, a budget and some goals.
Take your time, but think big.
Financial goals shouldn’t just be about paying off your debt. You may want to retire early, become a buy-to- let property mogul or start a family or business.
These goals will affect the way you view and manage your finances, but it is these goals that will keep you on track month after month and year after year.
Now that you have a list of your goals, decide how you want to prioritise them. For example,
- Amass an emergency fund of £1000
- Become debt free
- Create sinking funds
- Invest in stocks
- Increase savings
- Buy a house
- Buy my dream car
- Be mortgage free
- Increase pension contributions
- Retire at the age of 55.
So what’s the plan?
I mean, it’s a budget isn’t it?
My recommended way of budgeting advice varies dependant on what the goals of my clients are. If you are looking to pay off debt, a zero-based budget works really well. If your goals centre more around saving and investing the bucket budgeting method works better here.
To start a budget, you need 3 things:
- The details of your income- including any additional regular payments you receive
- Details of your monthly household outgoings
- Names, amounts and interest rates of any consumer debt that you have.
A budget is key to your success and can be done in one of three ways:
- In your head- of course, I don’t recommend this
- On paper- I love seeing my numbers in my planner and seeing the ‘books balanced’. In reality though, you cannot quickly change the figures throughout the weeks and months
- A good old fashioned spreadsheet- I do love a good spreadsheet and I love the ease of use when it comes to updating my figures and payments throughout the month, but ultimately you have to use what is best for you to make this work.
Creating a budget
When creating your budget, you should ensure that you first work out all of your incoming for the week or month, depending on how often you are paid.
You should then work out all of your household outgoings, including your shopping and transport budget amounts and talk it through with your partner. You need to also add in details of your debt repayments here.
At this point, you will have what is called ‘expendable income’, meaning you have money to save or spend. You should place the most emphasis on putting money into your savings, or ‘future you’, as I like to call it.
However, don’t forget to allocate some money to current you, whether this is a weekly spending budget, a date night fund or a ‘fun fund’. Adding this to your budget will encourage you to keep going so that you do not fall back into previous spending habits.
Paying down debt should be a priority for you. I recommend an app called Debt Payoff Planner that calculates your outstanding payments and your debt free date. It’s a great feeling seeing it reduce every month and you can put in both standard and overpayments using either the avalanche or snowball method of debt repayment.
With debt repayments, the best thing to do once you have cleared one payment, is to use the money you paid to this to increase payments on your next debt hence, the “snowball method”
To commit to a debt free life, make sure you cancel your credit accounts so that you aren’t tempted to use them in an “emergency”. This is what your emergency fund is there for.
To clear debt quicker, you can “hustle”. This means bringing in additional money in anyway that you can and use it to clear down your debt. I do this in a number of ways and publish the information on my online income report.
When to take advice
You can take advice at any stage of your financial journey and there are many company’s that offer products and services.
I personally work with a small amount of clients looking at budgeting, savings, making money and clearing debt however, I am not a financial planner and you should speak to a financial advisor if you are looking at making investment decisions.
This advice to me seems simple however, there are some people who do not know where to turn when they find themselves in a financial situation they don’t feel they can get out of.
If this sounds like something you need support with, there really is no shame in asking for help and advice and regulated debt charities can support you with this.
Invest in yourself and your financial future so that you won’t ever need to worry about your finances again and if I can be of any further help please let me know.