words Alexa Wang
Many people struggle with a difficult personal financial situation at some point in their lives.
It may be in the early days of adulthood, when income streams are low and keeping a budget is a new challenge, or during a transitional phase such as a marriage, during job instability, or simply over time as expenditures get ahead of income. Here are some practical steps on how to take control of your personal finances.
Assess your situation
The first thing to do is take a hard look at reality. It’s time to make some lists. Write down every income source you have, the sum, and how frequently it occurs. Be conservative with estimates. A regular salary is easy to record, but if you have other, variable sources of income, such as income from a side job, then do not include these unless they arrive with great regularity and in predictable amounts. Also include the value of assets such as savings, investments and property.
Now, make a list of debts and recurring expenses. This could include credit card or line of credit debts, lease or mortgage payments or other ongoing payments on goods and property, and subscriptions or recurring expenses such as services and utilities, taxes and other fees. Include how often expenses reoccur and, if applicable, the total sum owed and the duration of the repayment period. Don’t forget fees and interest on debts – in many cases, it’s more than just the original sum to be repaid.
There are two additional lists to complete. If you have records available, then collect real expenditures over the last year and make a list of living expenses by category. In this case, you’re trying to compile a list of what you actually spend money on, how much, and how often. In the next step, you’ll start filtering this down, but for now, be as complete and honest as possible. If you don’t have records available, then estimate and average results on a monthly basis.
Make a list of goals and necessary future expenses. This might include retirement savings, savings toward material goods and life goals, and any other things in the future for which you need to prepare. At this stage, don’t be conservative with your list. Look at it as a wish list and estimate high on the cost to achieve each goal.
Now, take these lists and tally them into totals, by year and by month.
Make a plan
Chances are your finances aren’t in ideal shape. If your income total is bigger than your debt and expense totals, then you’ve managed to live within your means. For most of us, those totals are troublingly close to even or reversed. You need to either increase your income and assets (ideally, cash or “liquid” assets, not assets that you can’t access) or decrease your debt and expenses.
Make a plan with small steps and achievable goals. You may or may not be able to increase your income and assets. If you can achieve increases without the challenges outweighing the benefits (e.g. destabilising your work situation, overloading yourself and burning out), then by all means, do so.
In most cases, the more achievable goal is to reduce expenses and debt, generally in that order. Set a goal to eliminate debt if you can. Certain types of debt, such as a mortgage, may not be possible to eliminate. Luckily, if you are a veteran in Texas, there are additional options available to you. You could consider the VA refinance Texas loan option and consolidate your debt while also lowering your monthly mortgage payment. This can be a game changer when it comes to managing your finances and reducing expenses. However, by eliminating debt, you are eliminating stress on your finances and ongoing expenses in the form of interest and fees. Use the lists you made in the first step to identify expenses you could reduce or eliminate. This may be challenging, but it is necessary if you can’t raise income to resolve financial imbalance. One tactic can be to drastically cut expenses in order to return your personal finances to a healthy balance, and then start reintroducing expenses as your finances permit.
It can be worth exploring additional sources of funds beyond salary increases. Debt consolidation can sometimes reduce the burden of interest payments. Grants or more favourable loan terms could help move your financial situation in the right direction. Lost funds can sometimes be reclaimed.
Go through your financial history and records for improperly allocated funds. PPI, errors on accounts, overpayments and other misallocations do happen. What is PPI? Payment protection insurance (PPI) guards against unexpected situations when credit repayments become impossible, and is a legitimate product. Historically, it was aggressively and mistakenly oversold by many financial institutions and may be eligible for reclamation.
Taking a realistic and thorough look at your current financial situation and making a plan to resolve it through any combination of income increases, debt resolution and expense decrease is key to getting on top of your personal finances. Keep in mind that you have the option to apply for personal loans. Indeed, that will depend on whether you can repay monthly and at the rate determined by the lender. However, it’s advisable to settle on companies such as Plenti that have positive track records in seeking personal loans. The idea here is to access funds without ending up with a debt you cannot pay for the duration spelled out in your loan application contract. We hope these personal finance tips helped. Exploring sources of additional funds can also help you along the path toward financial stability.