When you have a family, money management is essential. This is what will ensure that you stay out of debt, don’t have to go without and can even save towards more expensive purchases, such as family holidays, money towards your kids’ first cars and more. Of course, this is all easier said than done. We are often hit with unexpected costs and can find ourselves dipping into savings, overdrafts or accumulating debt in other ways. If you’re looking for ways to clear your debt and get some money back into that savings pot, here’s some advice that will help you along the way.
Creating a Budget
The first way to get ahead with money management is to create a budget. This will let you know what you and your family can spend within a month without causing yourself any financial issues, such as missing bill payments or accumulating debt. First, understand your take home pay. This is how much you take home each month after tax and other essential deductions. Then take away essential living costs. This can include things like rent, food shopping, energy bills and contracted payments or finance agreements. You will be left with your disposable income. This is how much you have available to use without overspending each month.
Clearing Your Debt
It’s essential that you clear all of your debt before generating savings to store to one side. Debts tend to almost always come hand in hand with interest rates, which means you pay back more than you initially borrowed. The longer you take to pay the money back, the more interest you will accrue, and the more your borrowing will cost you in the long run. There’s no point having savings put away in a savings account while your debt is constantly costing you money in the background. Here are some top tips for clearing your debts quickly and effectively.
- Speak to a Professional – there’s professional support and guidance out there that can help you to come up with a debt management plan. This will take your individual situation into account and, as long as you stick to it, will ensure you clear your debt in a fast and effective manner.
- Reduce Interest – most debts come paired with interest. See whether you can get a debt consolidation loan or balance transfer with a lower interest rate. This will reduce the amount you pay back in the long run.
- Dedicate More Disposable Income to Debts – if you want to clear your debts quickly, it’s important to make sure you’re making extra payments beyond the minimum payments. Dedicate a bigger portion of your disposable income towards this where possible.
Once you’re debt free, you can focus on saving money. This can be for a rainy day, towards something special or simply to have a safety net to fall back on if times get hard. Here are some tips to save more easily:
- Open a Savings Account – placing your money somewhere besides your regular account will prevent you from dipping into it. Plus, many savings accounts have preferable interest rates that will help your money to grow.
- Reducing Spending – reducing your general spending can free up more money for you to place in your savings account. Switch provides for cheaper bills and reduce luxury spends where possible.
These steps are all simple to implement into your routine, so give them a go. They could turn your finances around in no time!