How to learn from financial mistakes of the past
Tuesday, 24 January 2012 03:25
In the first month of the year, money is on a lot of people's minds after an expensive December. If your pockets are empty come the end of January, it might be time to find out whether you're making any financial mistakes and how to go about changing things for the better.
Do your own 'annual review'
Think Money, a leading financial solutions provider, has come up with one way to do this. It's advised people to dig out their old bank statements, budgets and bills and look at how their spending habits have changed from this time last year. It believes doing so can help you find out what you got right and what you got wrong.
A lot can happen over 12 months, so when you look back, consider how events have affected your finances and whether things have generally improved, or more importantly, got worse. If you are worse off than a year ago, looking back at the shape of your finances this time last year will help you find what you were doing right then and plan what to do next to improve your situation right now.
Don't live on borrowed money
The bright idea is a response to research by insurance provider Bright Grey, which says that 33% of people are either spending more than they earn, or just breaking even every month. Borrowing isn't necessarily a problem, but borrowing regularly can land you in trouble if you can't repay what you owe. The insurance provider wants people to make sure they have a 'financial safety-net' and Think Money agrees that everyone needs some financial security to fall back on.
Plan for your financial future
One way to do this is with financial products that can protect you, such as insurance, a pension or savings. However, when money is tight, or if you have debt obligations, it's not always easy to save. Perhaps the simplest way to free up money for savings is by taking an honest look at your spending and working out where you can cut back. If you have overstretched yourself with debt for example, a debt expert might be able to show you how to lower your monthly payments, or consolidate your debts into one.
A spokesperson for Think Money commented on the issue of debt: "If you were managing your debts successfully a year ago, but feel you've lost control now, what were you doing differently then? Did you have fewer debts of smaller amounts, a higher disposable income, or were you simply more financially organised? If you're facing debt problems, it's important to get professional advice as early as possible, so you can find an approach to budgeting and debt management that works for you."
While it's not always possible to save when you have debt commitments, an equally valuable way to secure your financial future is to work towards clearing any debts that are holding you back.
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