Halting The Debt Cycle: How To Manage Your Personal Finances

The complicated world of financial planning and the more tedious tasks of watching our money, saving it and budgeting it month on month are far from what we enjoy spending time doing. In general though, there are many of us that aren’t good with our finances; we frequently run out, we misjudge what we spend and we accumulate a lot of debt in a short space of time. It’s for this reason individuals regularly require guidance, both from peers and appropriately qualified professionals. Let’s look at some common errors people make with their personal finances:

License: Creative Commons image source
License: Creative Commons image source

1 – Frivolous Spending

Oftentimes its not the big costs that push us further into debt, it’s the small ones – a new dress for £30 bought from the highstreet on a whim, £10 on a lip stick because we’re going out after work, drinks out one night for £50 and £25 on a takeaway because we forgot to go to the supermarket earlier in the week and are too tired to go now. This sly spending of small amounts that we don’t notice adds up – and we’re left with it long after the momentary gains are gone.

Solution
If you’re brave you can tear up your credit cards. If you’re not quite ready for that yet keep a spreadsheet or a note on your computer of everything you spend, not only can you identify quickly where the money disappears to each month, but by documenting every receipt you’re likely to be a little more careful with your spending as a result.

2 – Credit Cards

For some a necessary evil – for others an evil temptation. That voice inside your head telling you to put the designer handbag on credit card…we all have it. The interest rates are phenomenally high though and buyers’ remorse a commonplace feeling among credit card users. Most of us choose to resort to credit cards at times, and are lumbered with the debt after so it is a common problem not made easier by the banks and their tempting offers.

Solution
One handy tip is to put your credit card in a tin full of ice and put it in the freezer, this way if you get the temptation to spend on impulse, you have to remove it from the freezer and wait some hours for it to defrost before you can do so. Chances are by then you may well have changed your mind.

3 – Inadequate Planning

We all know that its tedious budgeting for the month, sorting what’s going out from what’s coming in and allocating a weekly spend – but inadequate planning can lead to a serious amount of debt in a short space of time. If you’re renowned for always running out of funds come month end and are a self-confessed hopeless case when it comes to managing your own finances, then it might pay long term to address this.

Solution
Go to a chartered financial planner (these are registered with the CII). These professionals manage other people’s wealth for a living and they are up to date on the latest bonds, pensions and other funds that can help you save money as supposed to giving it up to the banks in the form of extortionate interest rates.

About the Author: Emily has a bad track record when it comes to frivolous spending. She’s recently worked with the Financial Planning Partners Ltd. who have successfully put some of her money away in a bond so she can finally start saving.

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