Money is one of the most common talking points at the moment. It’s no secret that costs have soared, leaving many people struggling to make ends meet. Managing your finances won’t eradicate high rates of inflation or expensive rent and mortgage costs, but it can help to reduce the risk of getting into debt and encountering cash flow issues. In this guide, we’ll outline some fundamental financial mistakes to avoid to help you steer clear of trouble.
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Not budgeting
The number one golden rule of effective money management is to live by a budget. Drawing up a monthly or weekly budget will help you to keep tabs on spending, maximize saving opportunities and lower the risk of running out of money. If you don’t already swear by a budget, it’s very easy to get started. You can use a spreadsheet, banking apps or good, old-fashioned pen and paper. Note down your regular outgoings, for example, rent or mortgage payments, your phone bill and utilities. Add your income in a separate column. Include one-off expenses for the month or week ahead, for example, a weekend away or your partner’s birthday. Calculate how much money you have available when taking the outgoings from your income. When you have a figure, you can decide how to divide the funds. Try to save as much as possible. If you have a credit card, pay off the balance before you save. This will help to reduce interest fees. Update your budget regularly to make sure it’s accurate.
Use your budget to identify costs you could cut out or reduce. You might find that you spend way more on eating out or ordering in, for example, or you might be paying for a subscription you forgot about. Set a new budget for the next month and use the money you save to pay off debts or add to your savings account balance.
Failing to understand borrowing
Studies show that the debt burden in the UK has risen by a staggering £18 million since the end of 2023. Many of us need to borrow money to buy houses or cover unexpected expenses, but there is a risk of getting into debt. Using credit cards to live is a danger, as interest rates can be high, which makes clearing balances difficult. If you are borrowing money, it’s essential to make sure that you can cover the cost of repayments. If you owe creditors money, you may be contacted by firms like Crown Asset Management. There’s a big difference between taking out a mortgage and paying a monthly fee and taking out a loan that you can’t afford or using credit cards to get by. If you lose control of spending, debts can spiral very quickly.
Whenever you borrow money, always check the terms and conditions and make sure you can pay the money back. Read about charges and fees. If you fall behind, this can affect your credit rating and increase the amount payable to the creditor. If you’re worried about paying bills or making your mortgage or rent payment, contact the lender as soon as possible. It may be possible to defer or delay a payment. It’s also crucial to seek expert advice if you have money worries. There is support available.
More and more people are experiencing financial difficulties, with rising living costs and an increased demand for affordable housing and rental properties. To reduce your risk of money troubles, draw up and stick to a budget, try to clear debts as a priority, take care when borrowing money and seek advice if you’re concerned about your debts.
