5 ways to FIX YOUR finances FAST
Don’t bury your head in the sand – take control of your cash flow and plan for the future by following these simple, practical tips
1 Track your spending
Keeping an eye on where your money goes is the first step to taking control of your finances. Whether you splash the cash or flex the credit card, keep a note of every penny you spend. Jot down each payment in a notebook or log it using an expenses app designed to help you identify spending patterns. ‘Once you’re clear where your cash is going, you can decide what to cut back on,’ says financial adviser Graham Lee. Do you really need those two coffees a day at over £2 a pop, for instance? And if you’re a smoker, quitting will save you a fortune. With cigarettes costing around £10 a pack, the average UK smoker spends over £20 a week on their habit, according to recent research*, so you could save over £1,000 a year by giving up the ciggies.
2 Budget
Once you’ve worked out where and how you’re currently spending your cash, you can start to budget. The easiest way is to follow the 50/20/30 rule. This means that, from your take-home pay, you should allocate 50% to ‘essential expenses’, including housing, transportation, utilities and groceries. The next 20% should be earmarked for ‘financial priorities’: retirement, savings and debt. The last 30% of your income can then be allocated to ‘lifestyle choices’, which covers everything from clothes shopping to gifts, travel and entertainment, plus anything else. To work out your spending in more detail, use the handy budgeting tool on stepchange.org.
3 Shop around
It really does pay to shop around for the best deals. Providers of everything from insurance, mortgages and credit cards to broadband, gas and electricity know that most of us can’t be bothered to switch providers, so they don’t reward us for our loyalty. On the other hand, many providers offer discounted offers for your first year. ‘Get into the habit of switching to the best deals every year and you’ll save yourself thousands over time,’ says Graham. With comparison sites and easy-switch apps, it’s never been easier to find the best deals and change supplier.
4 Check your credit score
Your credit file can make all the difference to your finances. It should show accurate information about any credit you’ve taken out and how you’ve managed repayments. ‘This helps companies decide how risky it is to lend you money,’ says Graham. ‘If lenders consider you high risk, they could refuse you credit or charge you a higher interest rate.’ Some credit reference agencies offer a free one-month trial that enables you to access your credit score** – which could make interesting reading. To contest any mistakes, contact either the credit reference agency or the lender. They should update their records; if they don’t, you could make a complaint. ‘Not doing this could cost you dearly in future,’ says Graham.
5 Pay down debt
There are so many things you need to pay out for each month that it can be difficult to know what you should pay first. Prioritise your bills according to the consequences of not paying them. For example, if you don’t pay your rent or your mortgage you could lose your home, so it’s important to pay this before other debts. After covering your priorities and essentials, look at paying off any debts, with the highest interest rates first. That’s usually unsecured loans such as credit card balances.