One of the most important life lessons your parents teach you when growing up is to understand the value of money. One of the most basic principles is that you should never spend more than you have. At the school canteen this was impossible, mainly because your buying style used to be asking for 20p worth of lollies, but in the adult world it’s a lot easier to fall victim to debt.
For years now, the only financial news being broadcast has been of the negative variety. Since the recession first hit in 2008, the news has been flooded with stories of economic struggles. More recently you would have heard that electricity, gas, petrol and housing prices are all on the rise, making money a tough topic. The average British family has their income stretched as it is to cover the costs of daily life – housing, bills, food and transport. And most people don’t have a large lump sum stored in case you need it suddenly.
But, if you apply the same elementary factors to money now that you did when you were a child, you’ll have no problem managing your finances.
Overspending is a sure way to end up in debt. But the fact is that you need more than your weekly income to build a life. Only the very wealthy have enough money to be able to buy a new house or car outright. For the rest of the population, it means years of saving and taking on a large debt.
Loans are a fact of life. When you’re young your parents often lend you money for particular items on the condition that you pay them back. Well, it’s the exact same principle when you’re an adult, only you now deal with a financial institution and the complexities of interest rate and types of loans comes into play.
If you’re going to take on a loan you need to be sure you can repay it. Some people choose to borrow more than they need so that if any expenses suddenly pop up, they have the money to deal with it. But, this strategy means you’ll end up paying more in the long run.
The best types of loans to take are fixed-rate unsecured personal loans. A fixed rate means you are given a set interest rate for the entire term of your loan. This way you’re protected from any sudden spikes in interest rates and will know exactly how much the return will be. If your loan is unsecured you aren’t required to put up any collateral against the debt in case for, for some reason, you fall behind in repayments.
Financial institutions like Clydesdale Bank offer this type of loan. Their clients are able to borrow up to £25,000 and can pay it back over one to five years.
Even though you may desperately want the latest smartphone or to see the newest West End show, you have to focus on what you need first. It’s so tempting to splurge on payday when you feel you can afford it, but impulse buying is one of the worst things you can with your money.
To avoid this, come up with a budget. Track your spending for a month to gauge an idea of where your money leaks. By looking at exactly how you’re spending you’ll probably be surprised as to how much goes on unnecessary extras. Once you’ve collated your data, be harsh with yourself and immediately cut out any additions you can live without.
As long as you can afford your rent or mortgage, bills, transport and food, then any extra is a bonus.
As soon as you get paid put the exact amount you need for these necessities to one side. Knowing you have those areas covered takes some of the financial stress off your shoulders and gives you an exact figure left for you to play with.
For some people, saving is a scary word. The ability to say ‘no’ is hard to master, but it’s one of the most important tools you need to be able to save money. We live in a society where people want everything now. You don’t want to wait until you can sensibly afford the latest gadget; because the rapidly changing advancements in technology mean that the newest product is always just around the corner.
But saving doesn’t have to be hard. Even £10 a week can amount to a lot over a lifetime. After 10 years you’ll have saved over £5,000. Saving doesn’t have to mean that you put away everything you’ve got left for extras, like dinners out or movie dates. Just try and set yourself a realistic goal and soon you won’t even think about it.