Regain Control of Your Finances with a More Streamlined Approach: 5 Tips
Feeling overwhelmed by finances is common, especially when managing multiple repayments and unexpected expenses. With a focused approach, you can ease your financial struggles and move toward greater stability.
Below, we’ll cover practical steps to simplify your money management and tackle debt more effectively.
Review Your Outgoings and Identify Financial Drains
Before making any significant financial decisions, you’ll want to understand where your money is going each month. Start by going through your bank statements, utility bills, overdraft fees, subscriptions, car payments, and insurance premiums.
It may be tempting to overlook small charges, such as a £12 monthly streaming subscription, but they can add up quickly if you have several that you no longer use. Scrutinising your spending habits helps you identify areas where you can cut back and redirect that money towards more meaningful goals, like debt repayment or savings.
Prioritise High-Interest Debts
High-interest credit cards and payday loans often come with exorbitant rates that make it difficult for borrowers to reduce their balances. They can quickly get trapped in a never-ending cycle of taking on additional debt to repay their original loans. While they’re usually unlikely to be as urgent as priority debts, such as income tax or mortgage repayments, they can still be financially devastating.
If you don’t have priority debts, focus your repayment strategy on high-interest loans and overdrafts. It will reduce the amount of interest you’re paying overall and redirect funds to tackle lower-interest debts, avoiding a visit from the bailiffs.
Consider Consolidating Multiple Debts
By combining credit cards, personal loans, or store cards into a single fixed repayment with a debt consolidation loan, you streamline your finances and may secure a lower interest rate. It won’t erase your debt, but it can make staying on top of it and playing for monthly repayments easier.
Consistent monthly repayments on your consolidated loan can improve your credit score while reducing the total interest you pay over time. You may also find that it reduces the total interest you pay over time.
Create a Sustainable Repayment Plan
After reviewing your income and expenses, establish an honest budget that accurately reflects your needs. Include essentials, such as utilities, transportation, food, and debt repayments. It will provide a clearer view of what you can afford to spend monthly and what to skip.
Using a spreadsheet in Google Sheets or Excel can help by centralising all your financial information. You can access it out and about on your phone if you want to update it or check if a purchase is a good idea.
Stay Alert to Changing Interest Rates and Lender Criteria
The Bank of England’s interest rate decisions directly impact the cost of borrowing. The rate currently stands at 4.25%, but cuts are expected later in the year due to poor economic growth and rising unemployment.
In the meantime, borrowers with variable-rate loans might see modest relief, but those remortgaging older fixed-rate deals could still face higher monthly payments. If you’re on a variable-rate loan, keep an eye on July to August MPC updates, as your repayments may respond quickly to cuts. Regardless of the nature of your loans, aim to keep your credit score as high as possible, as lenders are likely to scrutinise the details under current economic conditions.