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How to Take Control of Your Finances

28 March 2018 No Comment

As well as all the other life lessons that you learn between leaving school and entering the real world, your finances are something young people are often introduced to the hard way. If you’ve just left college or university, you may not have had total control over your finances for very long, leading to slip-ups that can be costly and confusing. Loans, debts, income, tax – they seem impenetrable from the outset. Thankfully though, getting your head around your money takes only a few simple steps. It’s a steep learning curve, but it’ll achieve you peace of mind over your finances.

Get an Overview

The first step in conceiving exactly how your cash flow is structured is to sketch up a comprehensive ins-and-outs map of your finances. Do this preferably on a spreadsheet that sums changing values so that you’re easily able to edit your model as you experience the inevitable changes in career, rent and loan repayments that occur in youth. Taking a look at the end result is hugely helpful in demystifying personal finance, giving you a less complex idea of the money you’re turning over.

From this spreadsheet, you’ll also be able to get an overview of your overall budget, breaking it down into months, weeks and even days if you need to. Likewise, the spreadsheet means a credit card debt or loan repayment that’s causing you to hemorrhage money every month can be targeted and your finances shifted to savvily save you some money that you’d otherwise be resigned to pay.

Brutally Budget

Everyone has their idea of what over-expenditure is. Some young people eat out every week or head on a justified spending spree when their paycheck lands; others live extremely frugally and limit their lifestyle to cheap or free experiences. Wherever you fall on that spectrum, there are two rules of budgeting for young people that will sit you in excellent stead moving into the future of your finances. Be brutal with yourself when it comes to recognizing over-spending, and give yourself adequate leeway and flexibility.

A broken-down budget, taking into account what you spend on clothes, food, drink, and events, will reveal those hidden areas where you’re doing your finances a great disservice. Cut out whatever you find to be an unjustifiable expenditure. You’ll adapt quickly to the change. Meanwhile, strict budgets are always broken, so be easy with exactly how much you plan on spending and give yourself a cushion for those unforeseeable expenses, like car maintenance or a healthcare bill.

Build a Credit Rating

Emerging as you are into the world of finance, work and pay, your credit rating is likely not hitting the heights required for moneylenders to trust you with a sizable loan or mortgage. Credit scores are important: poor ones will limit financial freedom until you’re deemed financially trustworthy – a journey of many transactions, book balances and recorded responsible spending behaviors. This is where your spreadsheets and budgeting come in. You’ll have a knowledge of and control over your finances.

Your credit score is affected by such factors as unpaid debts, credit card spending, and the amount you pay in tax. Plenty of these factors can be controlled. For instance, it’s worth getting a credit card, even if you’re doing fine with just a debit card because spending on it will improve your credit score. Likewise, it’s worth making a big effort to shift your income into repaying debts. Being as debt-free as possible will give you more financial freedom as well as giving you psychological freedom.

Use Helpful Resources

You needn’t do all of your personal finance work alone. In fact, it would be inadvisable to do so when there’s a world of free advice and specially-tailored companies out there who’s ready to help emerging and promising young people with their finances. Whether it’s digital banks with a range of accessible services or local citizen’s advice centers, there will always be help at hand if you find yourself plummeting into mounting debts, or if you need financial advice for a business venture.

Sites such as The Credit Review do much of the legwork of finding these helping hands for you, rating the best services from student loan schemes to credit repair so that you’re able to choose from the best of the crop. Such sites are also useful in exposing in layman’s terms some of the tricky terminology and mechanics of the financial world so that you’re given all the information you need to make informed and difficult financial decisions as you move into a new stage of financial maturity.

Streamline as Much as Possible

Taking a look through your bank statement, you’ll be forgiven for not particularly knowing where to start. In the days of almost thoughtless contactless payments, links to companies like PayPal and Amazon and services like Uber or Deliveroo, you’ll have a myriad of costs that can be incredibly difficult to digest, even if you’ve drawn up a spreadsheet for that very purpose. Some charges from phone companies and internet providers, often aren’t explicit in your statement, causing further confusion.

An excellent solution to this information overload is to streamline your finances through smart money-management strategies. It will make clear the muddy waters of various bank charges. For instance, having a bank account for all of your necessary expenses (rent, utilities, food, transport) and one for your every day extra expenses will simplify how you look at your finances. A third account for savings should be established as soon as possible in your adult life, with the flexibility to give or take a few hundred bucks into other accounts as your finances change.

Reaching financial maturity is a case of knowing the ins and outs of your own personal money matrix. It’s daunting to begin with but elegantly simple once you’ve taken the necessary steps. Being in control of your finances and improving your credit score will open doors that poor financial planning locks from you, so follow these simple tips to take control over your finances, establishing the freedom to take out business loans or a mortgage on your dream property as you move into adulthood.

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