Being financially independent means being able to manage your money so that you have a good hold on your finances. If you’re not sure where to start, here are a few helpful hacks that you can use to take control of your money.
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Why prioritise money management?
Firstly, it helps to understand why money management is so important.
12.9 million adults in the UK have low financial resilience. So, it’s essential to learn how to manage your money so you don’t end up in the same boat.
No matter what you earn, if you don’t learn how to manage your money, you will always struggle financially.
How to take control of your finances?
- Assess your financial situation
If you’re looking to get better at managing your money, you need to start by assessing your financial situation. Although this can be tricky if you’re worried about your bank balance, it’s an important first step.
If you can, try to understand how much you have coming in and going out each month. That way, you can see how much you have and where it’s disappearing.
- Clear your debts
To be financially stable, you will need to clear any debts, starting with high-interest ones. One way to clear a high-interest loan is by using a more manageable online loan to make the full payment. That way, you can clear the high interest and pay off the loan at a lower interest rate instead.
However, it’s important to understand that a loan can worsen your debt if not managed correctly. So, before you go ahead, make sure that you can meet the repayments in the new contract.
If you don’t already have a budget, it’s time to create one!
When considering your budget, make sure you allow for:
- Household bills
- Living costs
- Financial products (like bank charges or interest)
- Travel costs
- Your ‘fun money
- How much you’re going to save each month
When creating your budget, try not to be too restrictive or you might end up relying on credit to make ends meet when your initial budget runs out.
- Pay into your savings
It’s recommended that you should have at least 3 months’ worth of living expenses saved away for a rainy day. Once you have a positive balance at the end of each month, make sure to put money into savings.
The best way to do this is to have separate savings account so you don’t accidentally eat into your savings.
Sometimes, the first step towards managing your money is hard. However, by following the above tips, you’ll be on the road to financial freedom in no time.