Make your debt history
As trainee CAs you will already have an advanced grasp of numbers and financial reports, but it’s still possible to neglect your personal budgets; just think about medical staff who indulge in smoking – actions are easier said than done!
At this time of year, dwindling bank balances can become a real cause for concern, but it’s time to stop berating and start budgeting. Find out how you can take back control of your spending habits and kick those debts to touch.
6. Plan it out
Think about what you would like to achieve (financially) for the year ahead. Perhaps it’s time to put down that flat deposit and join the property ladder or set up a private pension plan – maybe it’s a resolution that you will not spend that amount of money in the winter months ever again!
Whatever your goal, now’s the time to make a 12-point plan on achieving this. A time-frame will help you stick to your plans, and rather than hiding it away in a phone list or on your computer, think about getting a wall-planner; they’re less easy to forget about and show tangible progress.
5. Set budgets
By this, we mean that you think about how much money you need to cover rent / mortgage, and the essential household bills like electricity. It’s a good idea to build in leeway for large, surprising bills by over-estimating how much you will need each month.
If last month’s payments totalled £1,000, then you should estimate as needing £1,150-£1,200 each month.
You should next think about your everyday needs such as toiletries and sustenance – you would be shocked by how much extra cost this can bring by not keeping an eye on it.
For example, if you’re in the habit of buying a lunchtime meal deal every day, this can quickly add up to £60 a month for 20 lunches (over £700 a year)!
Lastly, build in some disposable income where possible – this can be used for luxuries (e.g. cinema), essentials (replacing work shoes) or emergencies.
Think realistically about how much you spend – if you allocate an austere goal you may find yourself abandoning your budgets a few months in!
4. Decide sacrifices
Got a gym membership you never use, but never cancel out of guilt of not going? Cancel it – you can always restart again when you have the inclination, and there may be new customer deals.
Or you only watch streaming services on a laptop and neglect a TV package? Get rid of the TV package: the goal is to pick out what items in your budget are causing unnecessary expense and what you won’t particularly miss.
3. Check direct debits and overdrafts
Online banking has given us even greater control for regulating our monetary affairs, so take advantage of your online statements. Review current payees and discover if any are missing – if you kept missing a payment because it was not an automated debit (and all the late payment fees that can accrue), then make sure it’s on there.
It’s also good practice to check your overdrafts – if you find yourself slipping into the red, then think about extending this over a temporary basis to avoid unarranged overdraft fees.
When you’re back in the green for three consistent months you can look at reducing this again.
2. Set up a savings account
It’s tempting to access money that you’re putting away for a rainy day when it sits in your debit account, so take advantage of the free savings accounts available.
Set up a monthly, manageable payment to instantly go from your debit account to your savings account just after pay-day; this way you will have less temptation to spend it!
1. And finally, check outstanding debts
If you are currently paying back a student loan, for example, then it’s a good idea to frequently check the balance – the repayment structure can often mean that you overpay (to be credited at a later date) due to the gap in time between the loan company taking money and receiving accurate past payment data from HMRC.
You can send copies of your self-assessment or pay slips to the company to update their records and stop any further payments being taken. You can also repay some loans or credit agreements as a lump sum to reduce interest charges.
For many students, debt is an unfortunate fact of life, so it’s important to be informed about the various options that are available to help you manage debt in the best way. ICAS has put together this list of handy hints and tips to ensure you choose the right financial support for your situation.