Full Guide to Managing Family Finances – Chapter 15
Struggling with debt and worried about the financial future of your family? In this article Cashfloat presents an overview of the different aspects of family finance that you need to know about from budgeting to dealing with debts to pensions. Read on to find out more
Different Aspects of Family Finance
Planning your family’s financial future may appear to be a complex and challenging project. But there are some simple steps you can take to achieve your aim. Basic principles like living within your means, saving for both short and long term goals, paying down debts and thinking ahead will all help you to secure your family’s future financial security.
Cashfloat, a leading payday loan lender in the UK, provide different aspects of family finances that you should consider when planning out the financial future of your family.
- Manage Your Family Finances with a Budget
- Cut Debt by Repaying Credit Cards and Loans
- Build up Your Savings
- Insurance for the Family
- Saving up for Your Pension
One of the most effective tools that is useful for managing family finances is to set a household budget. This is a very simple method of keeping on top of all the income and the outgoings of the household. You can use a spreadsheet as a record and a planner or you can just keep a written record. Both methods are effective. They will clearly show you exactly where your money comes from and where it’s going to. If you use an online budget planner when recording your finances it will show a breakdown of where the money has been spent. This will give you an indication of where you can best cut down on non essential spending.
Once you have achieved a close look at where you are spending your money it will soon become clear whether or not you are overspending i.e. spending more money than you have coming in. This is a warning sign that should be immediately addressed. You can cut down on small insignificant items that soon build up to large amounts. Keeping a diary of exactly what is spent is another good tool. This will give you a complete picture of your spending habits. This is especially if you keep the record for a year or more.
The fastest way to pay down your debts is to deal with the credit cards first. These lines of credit charge the highest amounts of interest. Although you are only asked for the minimum payment each month, it could take years to clear the debt. So, pay off store cards and credit cards first as these charge the most. Then apply your payments to personal loans including payday loans as long as there is no early repayment penalty clause. If there is, you can put aside the extra money in a regular savings account. This will at least offset some of the interest being charged.
If you do have a lot of debt and have been getting letters about late or missed payments then it is unwise to ignore them. Most companies will come to an arrangement if you are struggling to make the amounts required. Always keep in mind that the priorities for payment are rent, mortgage and utility bills. If these are also causing problems then you probably need some serious advice from a debt counsellor or an organisation like the Citizens Advice Bureau.
Getting help to deal with debts may be a difficult step to take. However, most families owe money on a mortgage or car loan and when times are hard they will have faced the same kind of problem. So, don’t bury your head in the sand where debts are concerned. Face the problems head on and you will prevent sleepless nights and possible stress related depression. Totalling up the full amount you owe can often be a painful experience but once the amount is out in the open you can begin to deal with the problem.
Savings, insurance and pensions are three of the most important aspects of managing family finances. Whilst many people find it difficult to get motivated to save for a specific goal, this is a habit well worth cultivating. Focus on the item you want to buy and don’t look at the amount you save every month. In this way you will find it easier to achieve your goal. But, before saving for a new TV or smart phone you should save up an emergency fund that can be used for when something unexpected occurs. This could be something like a large car repair bill or a central heating boiler breakdown. In addition, most families in the UK could only last for two or three months if they experienced a loss of income so it is always a good plan to have six months worth of salary saved up if possible.
When you’ve established your emergency pot of savings you can think about saving for a new car or a holiday. Instead of relying on credit cards to foot the bill and pay back large sums of interest, use your new savings account and enjoy interest free money. A regular savings account that is set up through a direct debit or standing order from your current account is a good option. In this way the amount will be gone from your wages before you get it and so you will not miss it so much. If you get a pay rise, don’t allow the extra amount to seep away on everyday spending. Put it to one side as savings and enjoy the benefits of the extra money at a later date.
Insurance is a must for all families. This means not just buildings and contents policies but also cover for the mortgage repayments. In addition you should consider ill health cover that would pay out enough for household bills should you be off work for a long period of time. Shop around for car and travel insurance and you could save some large sums of money. Managing family finances is all about the detail so do some research and your forward planning will pay hefty dividends.
One of the most ignored aspects of planning family finances is retirement and pensions. We all think there is plenty of time to go before we retire. But, the time passes so quickly that starting a pension as soon as possible is an essential. As the age for receiving a state pension increases it has become even more essential to make some plans for a pension so that you do not have to work until you are 70. Pension contributions receive tax relief so pay the maximum contributions you can. It is also important to ensure that you have enough National Insurance contributions to qualify for a state pension. If there is a gap in your record you can top it up with voluntary contributions before you retire.
Remember to regularly review pensions and savings plans so that you remain ahead of the game. And, consider how you will manage on a reduced income when retirement is looming. If you want to stay in your current home you may need a larger income than you will get from a pension. So look ahead and work out your possible retirement income well in advance. These are just a few of the simple steps that you can take to ensure that you and your family achieve financial affordability both now and in the future.
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