How to establish debt and savings priorities
In this word money matters. Whether you don’t have enough of it, are hoping to save more of it or need to spend more of it, getting your financial priorities in order is the first step to successful money management. But while that’s all good in theory, it often leaves many people scratching their heads. With so many bills going out and often only just enough coming in to support it all, it can be puzzling trying to figure out exactly how you’re going to organize anything. That’s where we are here to help, with our handy guide to establishing debt and savings priorities-it’s simple once you have a plan!
Talk to a financial professional
This could be one of the biggest and best pieces of advice out there. So, you’re not exactly a money expert, luckily there are people out there who deal with finances and numbers all day every day. Save yourself the stress of trying to figure out what to do, and go have a chat with someone who already knows the best way to organise what you have.
Work with your chosen professional to examine where you currently stand, and then decide on a plan that helps you achieve your goals-whether that is repaying your student loan, or establishing a savings plan to help get you that new car.
Be aware of your incomings and outgoings
In order to be aware of what is coming in vs what is coming out, you need to have a budget. Now, a budget doesn’t have to be a stuffy word that equals no fun. Having a budget is simply having an awareness of what kind of money you're spending each money on bills; that’s everything from your rent and utilities, to debt payments and monthly car expenses. You should also consider factoring paying yourself first into your budget-that is putting money to one side for savings, before you spend anything else. The amount of money you have access to will be different for everyone, and naturally that means everyone's budget will look different too.
You can create a budget using an app or digital spreadsheet, but it can also be as simple as going old-school by grabbing a notebook and pen.
Once you are aware of your cash flow, it will give you a lot more control over your money, and will even allow for those little, personal treats every month. You might be surprised and find you have more money than anticipated left over for that monthly dinner date night!
Get on top of debt
Debt is a headache for everyone, no matter how much money you have coming into your bank account each month, but it’s also a part of life. It can be the stepping stone towards getting an education, setting up a dream business or landing a new car, if managed well. But if you let it slip through your fingers, it could hinder life progress and set you back.
So, how can debt be managed well? Firstly, it is an inevitable condition that you must pay it back, so figure out the simplest way for you to do this without ending up in financial turmoil. Factor it into your monthly budget and make sure they is room to pay back a feasible amount with every paycheck, or at least once a month. This way the amount you owe will decrease at a predictable, and most importantly, affordable rate.
Remember that you can pay the minimum amount, and don’t stretch yourself to pay off more than that unless it makes sense.
Make a savings fund
Hand-in-hand with getting your debt repayments in order is setting up a savings fund. Now, you should have a goal amount of between three and six months worth of living expenses as a rainy day fund. Alas, life is not all roses, and sometimes the unexpected does happen-whether it's losing your job or finding your car needs emergency maintenance. Having a rainy day fund means that you, hopefully, you will be protected in the event the worst does happen.
However, you should also think about setting up savings funds for other areas of your life-be that a personal, treat fund, a big vacation on the horizon, or, of course, your retirement fund. Find a bank account with a good interest rate and you might be luckily enough to see those saving figures creeping up over time.
Similarly, many employers offer retirement fund schemes that will see them match how much you put in on a monthly basis, or at last a certain percentage of it.
Be cautious with credit
Credit cards aren't inherently a bad thing, but its your relationship with them that can be negative. Many people suggest staying away from credit cards, and instead living cash only. Now, this doesn’t have to be the way to do it, and a credit card can actually save you from some sticky situations, as well as get you what you need before you need it, with a payback plan that is in your price range.
You just have to understand how credit works and make sure you retain a strong credit score. Credit card debt is very real, and can seriously affect your financial standing in the future if you let it take over. That means banks may turn you away, lending money from financial institutions will be a thing of the past and you can say goodbye to getting a car loan. Using a card responsibly is the only way to do it. Pay back your balance in full every month, don’t open too many credit accounts and make sure you don’t let the interest get the upper hand-if you can’t manage that, then don’t have one.
Balancing debt and savings might not happen overnight, and it could be a slow process. But you must remember that progress is progress, and getting your money in order is the number one thing to help you achieve financial success.