What comes to mind when you think about personal finances? Maybe that your personal finances would be better if you had more finance to play with? Or does the mere thought of confronting our finances bring you out in a cold sweat?
If that second statement is true for you, sadly, you are not alone. 1 in 4 UK adults has been plunged into financial despair thanks to the covid pandemic. Nearly 11 million are in financial difficulties due to low or poor incomes, unstable incomes or higher levels of debt to account for a change in circumstances due to the impact of lockdown measures.
While only time will tell if the current situation will change once the world gets to grips with recent events, it may not be quick enough for some families who are giving paycheck to paycheck and are one large bill away from complete financial ruin.
With this in mind, it is never a wasted task to get your finances under control. With adults in the 35 to 44-year-old age bracket holding the highest levels of debt at around £2,600 per person excluding mortgages, there is a real worry that more and more adults are becoming increasingly unable to effectively budget and manage their finances without increasing debt levels.
You might be wondering what the benefits are of having your finances under control, especially if you are just about managing to keep your head above water. However, getting your finances under control can be hugely beneficial in many different areas.
Ability to Invest
This is in yourself, your future, your family, or investing financially. If your finances are in complete disarray, you cannot do what is best for you and grow your wealth or savings. Maybe you are wanting to escape the vicious circle of renting and want to take out a mortgage? If so, mortgage applications can be brutal on your finances, and they go over everything with a fine-toothed comb. After all, it is a considerable sum the lender will be giving you to purchase a house to call your own, and they will rightly want to be confident you are responsible enough to pay it off.
Being able to present ordered and controlled finances that show you managing all your outgoings, generating enough income, and spending responsibly will pay you well when it comes to making bigger purchases in life. A good place to start is to check out the type of mortgage you could be accepted for based on your circumstances to get a feel of the type of offers and repayments you can expect to give you the motivation to become financially ready. www.mortgagecalculator.uk can enlighten your repayment options when taking on different mortgages.
Think about it this way, the less debt you have and need to pay each month, the more you can invest in doing the things that matter to you, be it building savings, increasing your investment portfolio, buying a new car or even going on holiday without worrying about being able to afford to pay for the holiday and all your outgoings too!
Lower Stress Levels
have you lay awake for a night, not able to sleep due to worrying about your finances? The lack of sleep only compounds your stress and traps you in a cycle of worry and stress. Excess stress levels can make you really ill if not addressed, and burying your head in the sand and ignoring what is going on around you won’t be helping matters.
Address the issue head-on and be honest with your situation and where you are right now in your life. Don’t lose your life to excess stress; come up with a comprehensive plan on reducing your stress levels by committing to organising your finances and looking for ways to address getting your debts, spending and income under control.
Lower Debt Levels
By getting your finances in order, you are giving yourself the ability to exactly where you stand regarding your income and expenditure. By doing this, you are addressing your debts levels read on and utilising your finances in the best way to clear your debt.
Repurpose any savings you have to clear debt levels – this may seem counterintuitive, but if you have large amounts of credit card debt, for example, chances are, you will be paying more in interest on these cards than you are getting on your savings. Once you have cleared the debt on one credit card, for example, using savings, you can use the money you were paying to this card to either put back into your savings or pay off other debts. Once you have reduced or eliminated debt levels, you can look at building up your savings.
Is losing your job or being able to afford repayments on what you owe keeping you up at night or causing you added worry? This is a common theme for people with disordered finances. Once you have taken stock of your financial situation and remedy this to improve it, you can rest assured you are emergency ready should the worst happen.
Lower levels of debt or increased savings due to reduced spending are all benefits of getting your finances under control. This then allows you to be ready for anything that crops up without facing immediate financial ruin. It won’t be easy, nor will you be able to achieve this overnight without any sacrifices, but taking small, consistent steps to improve your situation can allow you the peace of mind that financial stability affords you thanks to your hard work and perseverance.
Keep Your Assets
Once you owe a huge sum of money to various lenders or one lender and start to default, you are unable to make your repayment. You could be looking at bankruptcy to allow you to address your debt problems. However, this isn’t the best course of action for many people, and by declaring yourself bankrupt, you will be required to liquidate your assets.
The first thing you should be when looking at your debt levels is to address your assets and how you can protect them. After all, you have worked hard for them; you do not want to lose them. So if you are worried about what will happen if you lose the ability to remain financially solvent, take stock of your debts and finances asap to help you avoid this situation before it even becomes a reality.
More Effective Budgeting
Do you know what your budget is and what you need as a minimum to pay your bills? Those who avoid taking financial responsibility will spend first, worry later and before long find themselves trapped in a vicious circle of borrowing more than they can afford and ending up back in the same place.
No matter how well you budget, if you do not address the main reason you keep repeating the same behaviours, it won’t benefit you much.
So partner your budgeting with reducing your debt levels or addressing your income by either adding to it via another source or effectively utilising what you do have by reducing frivolous spending to get the maximum impact of effective money management and budgeting.
Spending some time understanding your financial behaviours and assessing your attitudes towards money and debt can help you better understand why you are in a financial situation and the actions that got you to this point.
A better understanding of our personal finances and the different financial options available for you can assist you in improving your credit score and removing the high levels of harmful debt that can adversely affect all areas of your life.
Remove the worry about spending too much money by effectively decreasing your debt levels by being conscious of your finances and making more informed, healthy decisions about all aspects of your finances, not just debt levels and how you will afford any repayments.
Taking Back Control
In conclusion, addressing your finances with a clear head and capacity to fully appreciate your personal finances on a deeper level can benefit you in many different ways. Money makes the world go round, as they say, and they aren’t wrong. But when your world is going around the wrong way due to poor financial decisions and rising debt levels, it can be a scary situation and a huge task to stop your current direction and reverse the action.
If you feel unable to sort out your financial issues yourself, ask for help from professionals to get the right advice for your personal situation and see what help is available for you. Try to avoid pushing your financial worries to the back of your mind and be honest, upfront and proactive about your circumstances to help you change things for the better and benefit from the relief that being financially stable by understanding and improving your personal finances can bring you.
It is never too late to start investing in your financial situation and making better changes for the future.