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If correctly managing your money sometimes feels like a daunting task and you end up living from pay check to pay check, it’s time to take on some healthier financial habits. Everyone should be aware of the basics of money management, however much or little they earn. Knowing these early will stand you in good stead for the rest of your life, including your retirement.
Budgeting means keeping a record of the money you have coming in from your salary, pension or benefits, and the money you pay out for things like rent, mortgage payments, insurance, Council Tax and living expenses. To work out your Income Tax and National Insurance requirements, use an online calculator like the one available from Pensions and Wealth Management Services. You need to be honest about what you’re spending, and each time you buy something, it’s a good idea to note it down. If you make a lot of irregular purchases and then wonder where your money has gone, setting a budget for treats such as clothes, gadgets, meals out and events will help you get this under control. Many people realise where they are going wrong with their spending as soon as they start making a note of their purchases. If your outgoings are greater than the money coming into your account, start looking at where you can reasonably cut back.
Loans and Credit Cards
It makes sense to pay off debts that incur the highest levels of interest first. This is the speediest way to clear your debts, but you must ensure that you don’t break the terms of any of your agreements. It’s definitely worth familiarizing yourself with the small print so that you don’t run into trouble with your loan provider. Store cards and credit cards usually charge the highest rates of interest, while personal loans from your bank tend to be accompanied by lower interest rates.
If you find it hard to get excited about putting money aside, it’s best to set a savings goal. This way you will have something tangible to do or buy once you have put the money aside. You should have emergency savings that you can fall back on if something untoward occurs, such as an accident that would prevent you from working or a boiler fault. Once you’ve put aside your emergency money, you can start to work towards more interesting savings goals, like holidays, new cars or home improvements.