It can be easy to lose focus when it comes to your finances, especially when you have multiple bills to pay and your spending habits are more impulsive than planned purchases. Add to this any existing borrowing you may have on loans or credit cards, it can quickly mount up and leave you with very little leftover before your next pay day. If this sounds familiar then you are not alone and it highlights the importance of financial literacy amongst UK adults. Having any form of financial vulnerability can leave you feeling stressed about any potential financial emergencies that may come up, and with a reported 2 in 5 UK workers living payday to payday , if you lost your job for example, would you have enough available funds to make ends meet? If the answer is no, it’s time to take control of your finances with these 4 ways to help you stay on top.
Review Your Finances Regularly & Budget
It’s ideal to start looking at what your money is being spent on each week or month so that you can understand your outgoings. Reducing non-essential spend is a good way to approach this, so take a look through your most recent bank statements and break down all of your expenditure. By splitting this into essential bills and non-essential ones, you will be able to start looking for trends in your spending habits. If at this point your essential outgoings already take up a large amount of your income, then it’s time to identify areas to cut down on and create a budget. Focusing on your most important outgoings first will ensure that your rent or mortgage and utility bills are paid, along with any borrowing repayments. To help, The Money Advice Service has an easy to follow guide to managing your money.
Look for Opportunities to Reduce Your Bills
Whilst looking at starting a budget, you should review any payments for services such as utility bills, your internet service provider, a gym membership, streaming services etc., and look for opportunities to reduce them. You may be surprised just how much you can save further on many household bills, and websites like Uswitch can help you find better deals on many of these. Many may find that they are overpaying for services, with prepayment energy customers overpaying by almost £390 million per year. If you think you may be overpaying for any of your monthly bills, compare and shop around and see what savings you can make.
Create an Emergency Savings Fund
Whilst cutting back on non-essential spend, you will hopefully be able to start putting some of this money into savings. Whilst doing so, you should consider having a separate emergency savings fund. Recently, many UK adults have found they have available funds to put more money aside, with an average of £459 being saved. When starting an emergency savings fund, you should aim to save enough to cover 3 months of essential outgoings, so that if a financial emergency happens, you will have the funds available to help. As many as a third of UK adults do not have enough saved to cover a month’s rent, so if this sounds familiar then building an emergency savings fund should be a goal.
Keep Your Debt Repayments Up to Date
As well as making savings where possible and cutting down spending, you should definitely keep any loan, credit card or mortgage repayments up to date. This will avoid any charges associated with missing repayments and ensure your credit rating isn’t further affected. If you can, aim to clear the debt amount quicker through overpayments if your lenders allow this, especially if you have been able to make savings. During lockdown in April, UK households repaid a record £7.4 billion in consumer debt, double that of the previous month, thanks to reduced outgoings across the country . The quicker you can reduce your debt levels, the more available funds you will have available for savings and purchases without over-reliance on further borrowing in future.
By following these 4 areas when looking into your money struggles, you’ll be back on top of your finances in no time, having a much healthier bank account and financial outlook.