Why Should You Focus On Taking Control Of Your Finances

Taking control of your finances isn’t the most glamorous of undertakings but it is undoubtedly one of the most important things you can do as an adult, both for the short term and with your future in mind and going into the new year with a clear understanding of your finances is a good start. The cost-of-living crisis that began in late 2021 was only the latest example of how fickle markets can be, and how quickly household finances can be turned on their head.

Even in the best economic environments, financial literacy is a key consideration. Without careful management of your money, it can be easy to fall into unsustainable spending patterns and potentially unmanageable debt. What are some key ways in which you can reverse course, and properly get a grip on your money?

Understanding Your Spending Patterns

In order to take positive steps towards handling your finances, you must first have a proper understanding of your own financial situation. There are some essential questions you should be able to answer, and, ideally, the answers to these questions should all be placed within a personal finance spreadsheet for ease of tracking. 

The questions are, in essence: how much do you make a month? How much must you spend each month, on housing, bills and essential groceries? And what, if any, debts do you owe?

Knowing the answers to these core questions means you can make shrewd and targeted decisions about your future. For instance, between your monthly income and essential monthly outgoings, you know exactly what your ceiling is for maximum monthly savings and how much you can put towards minimising debts or building savings.

Exploring Financial Solutions Sensibly

Knowing your baseline is, of course, step one of a multi-step process – the next of which is discerning what exactly will help you going forward. Setting a manageable personal budget, allowing for some fun expenditure each month, is a given; with a budget, you can more aggressively police your passive spending and improve your long-term savings as a result.

Monthly budgets don’t allow for the big things, though – and sometimes, big purchases are a necessary evil. Secured loans are a solid idea for funding bigger expenditures up-front, and without affecting the stature of your savings, but you must take care when considering taking on debt of any kind. Provided your monthly budget can account for more than the minimum monthly repayments on such a loan, you may be safe.

Setting and Prioritising Financial Goals

Of course, taking control of your finances isn’t something you just up and start doing. You need to have a clear idea as to what your aims are. Do you want to save a certain amount of money towards retirement, or are you hoping to get debt-free before a certain age? Establishing clear goals like these helps you focus on what truly matters, and properly cater your money management tactics to your ideal goal.