Being financially literate is, unfortunately, a thing that not all of us get a good grasp of by adulthood. By reaching a certain age, people tend to completely ignore their finances, an aspect that puts them in crippling debt. Learning how to make better financial decisions and being informed on all your opportunities will help you boost your family’s income significantly. Your household’s financial stability will become sturdier once you get a better grasp of some concepts and learn how to handle your money better. If you still have gaps in your financial education, read below to expand your knowledge on the topic.
Start Today
It’s never too late to start your financial journey. Learn more about investing, social security, estate planning and how credit cards work. Even if you’re not at the age where you look forward to your retirement, look into what retirement plans are and how do they work, insurance and taxes. This will help you manage better your finances. Start with the topic that interests you the most and make sure that you get a better grasp of all its aspects and details. Then, make your progression in all the topics listed above. This will make you
Budgeting Doesn’t Mean You Have to Restrict Your Lifestyle
In the collective mental, we have the prejudice that budgeting means restricting our lifestyle to the bare minimum. In some cases, where the household budget is very restricted, this may be true. However, if you make above minimum wage, your chances to budget your income without restricting it boost significantly. There are so many ways in which you can budget that the topic becomes overwhelming to many. The main idea would be not to focus too much on the sheer number of available options, but what works best for your family and your personality.
When it comes to getting down to budgeting rules, you have to only follow a rule: don’t go over your budget. The three steps that will help you tailor a great budget for your household are described below.
- Clearly establish your income;
- Clearly outline your expenses;
- Budget in such a fashion that your expenses won’t exceed your income.
The most popular budgeting method is the 50-20-30 method. This particular method means that you should direct a certain ratio of your household income in the following fashion:
- 50% of your income should go to necessities;
- 20% of your income should be redirected toward savings;
- 30% of your income should go to leisure and fun.
There are a series of advantages that come with this budgeting method. First, this will not make you feel like you are restricted in terms of your expenses. You can still invest in entertainment and some little extras while having some of your money directed to your savings account.
The downside of this method, however, is that for low-income families, 50% of their household income might not be necessary to cover monthly expenses.
Understand What Debt Is – And How to Get Rid of It
In most families, when the expenses exceed the income, the gap is compensated for by using credit cards. Monthly, more debt keeps accumulating in your account and paying it off becomes progressively harder. While this may be the most pleasant situation, there are still available some solutions. IVAs are the go-to option for homeowners with some financial troubles and relatively high debt. An individual voluntary arrangement is a financial solution where all the debt accumulated is consolidated in an advantageous form. While there will still be monthly payments for your debt, the rate is a highly affordable one. Besides, during IVAs, no creditors are allowed to contact you, regardless of your debts. Generally, to qualify for such financial products, the applicant must:
- Have accumulated £5000 or more in debt;
- Have money borrowed from two or more creditors;
- Have a regular income.
- Are able to pay £80 or more towards their unsecured debt.
While many think of IVAs as bankruptcy statements, these are far from being remotely similar. These are completely different concepts and financial products and you should discuss with an IVA specialist before jumping to conclusions.
Your Credit Score and How It Influences Your Financial Stability
Your credit score will most likely come to the discussion a lot, especially when you want to access different banking products like loans and debts. Your credit score is mainly containing financial information about your financial behaviors is in order to establish your creditworthiness. Third-party agencies are those who will gather all that information. They will check for variables like money borrowed if you paid your loans on time if you carry a monthly balance on your credit card and so on. The score ranges from 350 to 850. The higher, the better. Paying your bills on time and having a controllable amount of debt will make a real difference. So, try to be as disciplined as possible whenever you borrow money from different lenders.
Invest in Some Financial Tools
You can find free financial tools and money management tools that will help you keep a closer eye on your income and spending habits. Many have come to a conclusion, after installing such apps, that most of their money goes on unnecessary things and that they would be better off without those. Make sure that you keep track of your expenses for a month or two and then decide which ones are mandatory expenses and which ones are unnecessary pleasures and expenses. By doing so you will be able to cut off some of your biggest expenses in a matter of months.
These are some ground rules that you have to follow when trying to master more adequately your income and family finances. Remember that not all of us were born financially literate, some of us made some wrong decisions on the way, but this doesn’t mean that you can stop caring or paying attention to these. Learn on the way, pay attention to fixing all the wrongs that have been done and you will be fine, in the end.
