Okay let me preface this by saying I am not a financial advisor. I am not a financial expert. I am a novice of personal finance and I am not qualified to give my opinion on anything especially not other peoples finances.
Now with that out of the way lets get stuck into it.
A lot of people feel helpless or overwhelmed when it comes to personal finance so they avoid it. This makes the problem worse which causes them to avoid it more. This is a downward spiral and in my view the wrong attitude to have. As bad as a problem is now, ignoring it doesn’t fix it.
What few people seem to realise is that they have control over their money, its within their power and ability to control and change. You don’t just have to listlessly float through life wondering where it all goes you can take some proactive steps to make positive and effective changes to your life quite easily.
Spend Less Than You Earn
Spend less than you earn. Its easy to say but difficult to do, especially if you’re in the habit of spending money each month or in credit card debt. Make no mistake spending is a habit and its hard to break especially in this world of Amazon, cashless transactions and trends.
Something I found helpful when I started was splitting my finances into percentages. 10% to savings // 60% on rent and food and bills // 20% to spend on luxuries // 10% on my car. This method meant I could divide my income and allocate it where applicable. It also allows for you to keep spending in more controlled manner. This is flexible so change it fit you personal circumstances, you can also change the allocation to help you save more and spend less.
If this sort of thing isn’t for you, you can reframe the problem and just allocate 90% to spend on whatever you like and save the 10%. The important part is saving the 10%.
This 10% will do 2 things. First it will help prove to yourself that it is possible to save money. Secondly, if you’re anything like me seeing the pot grow will encourage you to grow it more.
Ditch the Debt
As a total the UK has around 55 billion in credit card debt. That doesn’t include mortgages, student loans, car loans or personal loans. This number to me is staggering but just goes to show the extent of our addiction to debt. I have found a chart outlining average debt per household by age.
As you can see from the chat the average debt is £9300 and with the prospect of paying interest on such a vast sum it is no wonder people feel so helpless! I have no doubt these numbers have gotten worse during Covid, I will update them if I find more recent numbers.
I have never used credit cards. If you have credit card debt pay it off! its eating your wealth, depending on the type of person you are you might even have logical and rational excuses for using a credit card but I would counter that credit cards are nothing but debt machines.
In fact I will call them debt cards from now on.
The use of debt has always confused me. I cannot understand why someone would want a 20% APR loan on money they don’t need to spend. It seems to be a gateway, borrow money, get nice things, pay it back the following month, realise you’re skint, borrow more money. So on and so fourth until you are up to your eyes in debt and the interest is mounting up.
If you cannot pay off your debt card because it has overwhelmed you then I would suggest reading Scott Pape’s book. He encourages you to write down all your debts, organize them smallest to biggest and then target the smallest debt with as much cash as possible whilst making the minimum repayments on the other debts. His logic is that this gets you into the habit of not using credit cards. I have linked his book on my Reading Materials page.
Like I said I am not into debt cards, so if you really do need help please seek financial assistance, there is nothing more soul destroying than spiralling debt. Speak to a debt advisor, your credit card provider who has an obligation to offer you assistance and debt repayment plans or look into it yourself:—-