This past year and a half has been a very difficult one for many people around the world. Not only have we had to juggle with travel restrictions, lockdown orders, and the fear of becoming ill — many of us have also been struggling financially. Personally, I have struggled to make ends meet, as well as having to take out a mortgage repayment holiday and a credit card top pay for car repairs.
Financial stress can be caused by a number of things: debt, unexpected expenses, or the compulsion to make purchases that we can’t actually afford. Without the right coping strategies or support, it can feel impossible to get through, however if you are suffering from financial stress, keep in mind that you not alone and thee are plenty of services and people who can help you.
Here are just a few ways to get your finances back in order and take the reins back.
- Learn how to budget
One of the best tips I can give you to get your finances back on track is to make a realistic budget that you can stick to. The key to creating a successful budget is to set realistic goals on how much you are going to save and spend every month. Having an idea of how much money you are making and how much you will be spending every month is the first step to getting your finances in order.
Make a note of your mortgage/rent, car insurance, car payments, travel costs, groceries, phone, entertainment and health insurance and how much you pay towards each one every month.
If you are spending more money than you are bringing in, you can cut unnecessary expenses or if you can find new ways of making money.
2. Set financial goals
Another step to taking control of your finances is to sit down and ask yourself what your financial goals are. A set of clear goals will help to provide you with direction and purpose in all areas of your financial life. You should create some short-term and long-term goals. Short term goals involve things like building up savings or paying off debts. Long term goals include net worth milestones and your retirement plans.
Your goals should be SMART goals – specific, measurable, achievable, relevant and time bound. Each goal should have a deadline, such as you could set a goal to pay off all of your student loan debts by a particular date.
If can help with motivation to regularly read your goals and track your success.
3. Create an emergency fund
Another effective way to reduce financial stress is to start building an emergency fund to cover any unexpected expenses that you may come across. Just by setting aside a small amount every month it will quickly build up into a useful pot. You could even consider looking at side hustles such as selling old clothes or books that you haven’t used in a while.
You should aim to have at least £1,000 in your emergency fund, and once you have a little extra money to save more, you should aim to have three to six months of living expenses in your fund.
4. Pay off your debts
Another step to achieving financial freedom is to pay off your debt as quickly as possible. Start by listing all of your current debt, including credit card debt, car loan, or student loan debt, and figure out the minimum amount you can pay every month towards each debt. To learn more about understanding debt consolidation, you can click here.