Personal Finance 101

There are few life skills more important than personal finance management. It is vital that you are responsible with your money so that you can enjoy a comfortable and enjoyable lifestyle in the present while building for the future. Unfortunately, many people struggle with their personal finances as it is not a topic taught in skills. This can make life difficult to manage even on a healthy salary, especially with the rising cost of living. With this in mind, this post will outline some of the key principles of smart financial management. Hopefully, this will help you improve your financial situation and build toward a brighter future.

Control Spending With A Budget

First, you should always have a household budget for the month. A budget allows you to control your spending, live within your means, and work towards your financial goals. There are many types of budgets that you can use, but many people find the 50/30/20 rule to be effective. This involves 50% of your take-home pay going toward essential spending (rent/mortgage, bills, food, etc), 30% towards non-essential spending (days out, clothes, takeaways), and the remaining 20% going towards debt clearance and/or savings.

Build An Emergency Fund

Life can be unpredictable, and you do not want an unexpected issue to derail your finances and interfere with your life. This is why one of the key principles of smart financial management is having an emergency fund. You should have between 3 and 6 months’ worth of expenses kept in an easy-access account. This will keep you afloat if you lose your job or can be used to fund unexpected costs, such as a household repair.

Clear Debt

While it is sometimes unavoidable to take on debt, and it can be valuable in many situations, it can also constantly hold your finances back and prevent you from building for the future. This is why you should prioritize clearing any debt you have, especially high-interest debt.

Save For The Future

It can be challenging, especially in the current economic climate, but you must always think about the future regarding your finances. You should consider the kind of lifestyle you want to have in retirement and then create a savings plan to help you achieve this. This is likely to include contributing to a pension, building up savings, investing, and keeping your living costs down.

Seek Advice If Needed

Managing personal finances can be tricky, and there are many factors that can impact your finances. If you are ever in a situation where you need advice, it is worth speaking to a financial adviser. They will be able to offer expert advice based on your specific circumstances and goals, which will be better than reading advice online. You can use platforms like financialadvisers.co.uk to find authorized and regulated advisors. You simply need to enter a few basic details and choose the type of advice you need, and you will be provided with a list of FCA-approved advisors.

Hopefully, this post will be informative and encourage you to take positive steps to control your finances.