Planning a budget, taking into account all of your income and outgoing expenses, can be one of the first steps to getting control of your finances.
Managing your money: 9 steps to financial wellbeing
Financial fitness, or wellbeing, is about feeling comfortable and in control of your financial position. It means having the knowledge and confidence to make the most of your money.
1. Plan your spending
It helps you take control and decide where you need and want to spend. This will include essentials like rent or Home Finance payments, utility bills and transport and hopefully some things you enjoy.
2. Keep track of your spending
Creating a budget is relatively easy; sticking to it can be harder. So monitoring your expenses is vital. Again, you can use apps to help, which shows you how much you’ll have left once your regular bills and payments have come out of your account. Being conscious of when and where you’re spending can help you keep it under control. It can also help you spot areas where you could cut back.
3. Spend wisely
This is about knowing your limits and using your money wisely so you don’t end up feeling guilty. It means focusing your spending on essentials and things you really get pleasure or value from. For example, you can spend money on clothes or going out with friends if those are things you enjoy, but include them in your budgeting so you won’t regret it later.
4. Avoid finance facilities for essential expenses
Obtaining finance is not necessarily a bad thing. When used appropriately, it can help you improve your finances. In particular, you want to avoid obtaining finance for day-to-day essential expenses like food or bills, as this may lead to bigger problems. Especially if you’re using short-term financing or finance with high profit rates.
5. Save money
You could set yourself a goal to save towards or aim to save a little extra each month to cover any yearly costs you have. You could set aside money every time you get paid, or use an app to round up your spending and put loose change into a savings account. The key is to make it a habit. Having goals and saving towards tangible things is a great way to stay motivated.
6. Find the best deals
While you don’t want to be over-thinking or second-guessing every purchase you make, it’s well worth doing your research when it matters. Online comparison sites can be a good place to start.
7. Choose the right financial products
Choosing financial products can be hard, given the volume and complexity of options. But, again, it’s worth shopping around to make sure you find the right products for you. Take the time to fully understand products, including the terms and conditions. It’s good to get into the habit of periodically reviewing all your products and looking around for better deals.
8. Prepare for the unexpected
Most of us experience the shock of an unexpected bill every once in a while. It pays to expect the unexpected and the best way to start is building up an emergency fund. This way if something does happen, you’ll have savings to fall back on. It’s generally recommended an emergency fund be equivalent to about three months’ worth of living expenses.
9. Plan for the future
Start putting money aside as soon as possible. Whether you keep this money in a savings account or invest it will depend on your individual circumstances. This would include whether you have an emergency fund yet, the size of your goal, how long you have to get there and your attitude to risk.
Priorities Consumer Debts
Prioritising your debts may help you feel more in control of your money. You could start by drawing up a budget that looks at your spending and assesses how much you have available to pay each month. If you can, look at any areas where you could cut back to free up more money.
Once you know how much you have available for payments, you may want to make a plan using one of the methods below.
Method 1 – Pay off the most expensive debt first
Typically, a cost-effective option is to pay the debt with the highest profit rate first, as it’s charging you the most to obtain finance. List out your debts in order of profit rate, going from highest to lowest. Prioritise paying the debt the top, working your way down the list over time.
Method 2 – Pay off the smallest debt first
While it may not be the most cost-effective method, some people prefer to pay off their smallest debts first so they can reduce the number of debts they have to think about. If you feel this may suit you, list out all your debts with the smallest one at the top and the largest one at the bottom. Prioritise paying the debt at the top, working your way down the list over time.
Method 3 – Debt consolidation
If you’re finding juggling multiple finance facilities too stressful, a debt consolidation finance can be a way to simplify your repayments and get back on track. A debt consolidation facility gives you the following benefits:
- a single profit rate
- recurring payments
- a clear finance term
By effectively transferring all your debts to one bank, you can simply make a single monthly payment instead of worrying about several facilities. Debt consolidation does not only help by making a single payment, it also helps effectively to reduce the overall profit amount paid. You have two possibilities here. Ring the bank with which you have a good track record – typically your salary transfer account. Alternatively, discuss debt consolidation with the bank where you have the largest outstanding. It’s worth remembering that you should only agree on a payment you can afford.
Reach out for help
If you’re struggling to make ends meet it can be a good idea to speak with friends and family, as well as trained professionals about your situation.
It may feel difficult but starting the conversation with someone you trust may help relieve some of the pressures you may be feeling. Being open about your finances with a close confidante garners emotional support, helps to reduce temptations, and also promotes accountability, helping you stay on track.
Your Financial Institution /Bank may have a team that’s able to provide you with assistance and also look at your options if you’re struggling to meet payments on your debts.
If you’re a FAB Islamic customer and you’ve missed a personal finance, or credit card payment, or you're concerned about your current overdraft position, or you're worried about missing one in the future, we can help.
Call our team of credit counsellor to get a helping hand.
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