If you’re wanting to focus on taking control of your personal finances this year, then you’re in the right place! We’re covering everything from getting in the know with where your finances are at, to building emergency funds and looking to increase your revenue streams.
Be Realistic About Where You’re At
The very first thing you should do is get realistic about where you’re at with your finances. You need to sit down, look at all of your bank accounts and any debts you are in, then figure out where you owe money, where you have savings and what’s in your current accounts. By figuring out either how much you have, or how much you owe, you will be able to figure out your next steps moving forwards. If you are in debt, then you need to think realistically about repayment options. If you have more money than you thought, focus on setting up an emergency fund or investing (we’ll get onto this). Whilst this might be daunting, it’s so much better to be in the know if you start taking control.
Set Up A Budget
Once you know a bit more about where you’re at financially, it’s time to set up a budget. This should be split up into 3 main sections; your essential spending, your wants and then your spending.
Your essential spending is things like your rent, bills, food, essential clothing and transport. Around 50% of your income should go into this section, and of course there are some elements of this you can control, such as choosing a cheaper rent option, shopping at a cheaper supermarket or making an effort to reduce your energy bills.
Then, you have your wants, like gym memberships, holidays, going out, tickets to events or going to the cinema. Around 30% of your spending should go on these wants.
Lastly, you have 20% left to go on your savings. This is everything from your house savings to an emergency fund, but would likely also include debt repayments. Speak to a financial advisor if you are in debt, as they can help you decide whether you should be trying to save as well or focus on paying off your debt.
Build An Emergency Fund
Next up, you should build up an emergency fund. Unexpected expenses come up all the time, so having money aside for this apart from your main savings is important, to help you maintain your savings goals but also pay for the essentials. It’s kind of like an insurance policy; great if you don’t need to use it, but it’s there if you do. Things like car and home repairs, medical bills or loss of income are common things you’d need an emergency fund for. You should have at least three to six months of your essential outgoings in your emergency fund, so you should aim to build this up as quickly as you can afford to. This gives you a financial buffer, then once you’ve built it up, you can either decide to keep adding to it or keep it stable and then use the money you’d been putting in to go into other investments or savings. If you don’t need it then great, but it’s best to have it there just in case.
Consider Side Hustles
Lastly, whilst we’ve discussed a lot of ways you can take control of your current finances and savings, something else you can do to improve your financial situation is to consider side hustles! Increasing your income streams will help ease some financial stress and build towards goals, so do some research and think about things that can easily fit into your routine and around other jobs. This might be dog sitting at the weekends, joining Uber, getting an evening job a couple of times a week, learning more about investing (and also being very aware of the different scams like Forex scams or crypto scams if that’s what you go into).
Final Thoughts
We hope you’ve found our advice about taking control of your personal finances useful! If you’d like to share more tips on Health/Lifestyle/Food, write for us and get in touch, we’d love to hear from you.