Your Money
Managing Money
Managing money and staying afloat financially can seem more like a lottery than a rational process these days. We live in a materialistic society and advertising constantly bombards us with things we need to keep up with our neighbours or to have the 'right' designer label item of clothing. No matter how much we earn the pressure is on us all to spend, spend, spend! It is so easy to justify spending with 'unrepeatable bargains', 'nothing to pay for 6 months', 'interest free credit' and the 'oh - so - friendly' flexible credit and store cards' to help us get what we want now. By comparison, saving seems boring when so much fun can be had spending. It is because of this that the total debt on credit cards jumped to £53.9bn in March 2003.
Debts can be Just around the Corner
Nearly all of us will know of people who have over committed financially and then suffered with crippling debts - often through no fault of their own just a change in circumstances. When this happens and the interest on debts begins to quickly mount up, people soon fall into worry, despair and hopelessness. Given that there are several million court claims issued for personal debt in this country every year, it can be seen that we are not just talking about an isolated few that suffer. Last year, more than eight million people - one in four of the adult population - have had difficulty obtaining credit from high street banks and other lenders.
Large Financial Commitments
We all need to think very carefully before making large financial commitments. When we buy things on credit we are making assumptions that we will be able to repay the cost out of future income. Often, this can be a dangerous assumption to make. Many of us get a buzz out of spending and some people even go on 'spending binges' to alleviate their depression. But saving money and making it work for you can also be fun. With good budgeting skills an ability to save for things you want and cultivating an 'eye for a bargain' you can soon be handling money far better than you have ever done before and buying items for much less as well. Given that money related problems are the major reason for the break-up of relationships, making your money work for you could help your health, stress-levels, self-esteem and even your marriage.
Making Your Money Go Further:
- Budget: Most people do not budget. They are invariably losing money because budgeting helps them to maximise their income, enforces priorities and cuts out any unnecessary spending. Spreading those large quarterly bills - such as gas and electricity - by changing to a monthly direct debit can also help you balance your outgoings and avoid getting those red reminders.
- Savings: Having worked out your budget you need to set aside a certain sum of money each month for saving. Initially, this can be hard to do because we all tend to live up to or just beyond our income. To achieve significant long-term benefit we may well have to forego some short-term spending now. Money needs to be put aside as an insurance to meet any unexpected crises. There are a whole range of savings options available to you. These include stocks and shares and unit and investment trusts. In recent years governments have introduced PEP's and now ISA's. This leads us to another important point, you must ensure that you are handling your money tax-effectively; there is no point investing in something where you can reclaim your tax if you don't pay any in the first place!
- Interest: One of the best ways of making your money work for you is to remember how interest works. If you are saving you will be earning some interest but if you are borrowing it will be at a significantly higher rate; on many occasions such as overdrafts, store and credit cards, interest will be accumulating (i.e. you will be paying interest on previous interest) as well. It therefore makes no sense to save £500 at 5% interest if you have £500 outstanding on your credit card where you are being charged interest at 20%. Equally, if you do decide to buy something on credit, make sure that you compare the total cost involved (interest and charges) not just the cash price.
- Your House: More than half of all RAF personnel now own their own home - the majority purchased with a mortgage. Usually the mortgage is over a 25-year period and, during that time, you could well pay back 3 to 4 times what you originally borrowed. One way you may be able to save substantial sums of money is to try and pay the mortgage off early, perhaps by paying 13 installments a year instead of 12. This would mean you could clear your mortgage after approximately 17 years which would save you many thousands of pounds. This would also act as a useful cushion if you did experience financial problems and you would not face any imminent prospect of having your house repossessed. Currently, in the UK over 400,000 people are in arrears with their mortgage and, last year, some 43,000 people had their homes repossessed.
- Money Saving Ideas: Many of us succumb to the pressure of advertising and buy things we don't need with money we don't have - sometimes to impress people we don't even like. We can pay £50 or more to advertise someone's brand name on our T-shirts or on our trainers. We can waste thousands of pounds simply when driving a new car off the garage forecourt. On a smaller scale, there are many ways we can save money. Working together as a family to come up with some ideas that will suit you all can be a very worthwhile exercise. Given how long and how hard we work to get our money - isn't it about time we used it to our best advantage and made it work for us.
- Getting help: If you have major financial problems you really should seek help. Besides the help and advice that is available from Citizen's Advice Bureaux (CAB) or Trading Standards in Scotland, there are companies who are willing to negotiate an individual's debts or to offer loans. While some of these companies are entirely legitimate, some are not. Before dealing with any commercial firm offering quick loans or insolvency advice, you are strongly advised to at least consult with the CAB or Trading Standards in confidence. Banks and building societies can also be a source of advice and frequently offer loans at preferential and competitive rates of interest. Assistance is also available from 'Credit Action' which is a national money charity promoting self-help in personal money matters.
Tel:
If you are struggling with your finances contact the Credit Action free phone Help Line on 0 to talk with a professional trained 'money management' Counsellor.
Website: http://www.creditaction.org.uk
Money Basics
MoneyBasics is a partnership between Credit Action, a national education charity, CCCS, a registered charity that assists people in financial difficulty, and GE Consumer Finance, a leading provider of consumer credit. Working together we're helping people of all ages to understand money and finance.
Website: http://www.moneybasics.co.uk
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