With interest rates on the rise, energy prices soaring and National Insurance increases hitting our pockets this month, money and debt management is on everyone’s mind. And rightly so. With huge cost of living increases there’s never been a better time to be paying more attention to your personal finances. Financial Coach and Accountant Tanya Ibberson (www.financialwingwoman.com) has seven ways to help you avoid getting into bad debt exclusively for Female First.

Tanya Ibberson, The Financial Flight Plan

Tanya Ibberson, The Financial Flight Plan

Money mindset

We all have a money history, whether we’re conscious of it or not. The stories that we tell ourselves in relation to money, such as the old favourite ‘money doesn’t grow on trees’, are carried with us from our early childhood. These beliefs inform the choices that we make and our overall approach to whether we’re proactive at managing our money, or more prone to burying our head in the sand. This is when debt can creep in; relying on high-cost credit cards, for example, can be part of that money history, depending on the examples set by our care givers. We aren’t traditionally taught money management in school, so being aware of our own money mindset can give us some insight into our habits when it comes to our personal finances.

Keep a close eye on your bank statements

There is no easy way of getting around this. For you to have a handle on your finances, you need to be fully up to speed with what money you have coming in, and how much you need to spend on bills and living costs. Regularly reviewing your bank statements will give you the full picture of what you’re actually spending. With awareness then comes the power of choice; are all those direct debit subscriptions payments used? Where do you spend the most money, and could you work your way through the list objectively to see where savings could be made? Include your credit card statements in this review too, as these are easy to forget.

Set a spending plan

Following on nicely from becoming best friends with your bank statements, use this information to set yourself a spending plan, and commit to sticking to it. The word ‘budget’ can often feel and sound restrictive but by setting a spending plan instead, you’re allowing yourself the means to spend instead of feeling as though you’re constantly being restricted. Managing the funds you have available will give you better control, and avoid the need for relying on credit cards for any unexpected expenses.

Build up an emergency savings fund

Whilst having a credit card on stand-by for emergencies is very common, a better way to manage financing unexpected costs is to build up an emergency fund that can be used instead. This doesn’t need to be a huge commitment; a small amount each month that can be built into your spending plan will quickly build up and will give you a resource to rely on instead of turning to high-cost credit cards to fund purchases.

Shop around for credit cards

Sometimes, using credit is inevitable, particularly for larger purchases. If these can be planned ahead, and you allow time to research your options, you will have a much better chance of being able to find the lowest rate for your needs. Make sure you investigate all charges; some credit cards boast favourable rates, but come with an annual charge instead, so read the small print. And if credit cards are a choice for you, try to pay off the balances regularly to keep any interest charged to a minimum. Only paying off the minimum amounts will cost a lot more over time.

Keep a close eye on payment due dates

This goes for any payments you make, but make sure you automate as many payments as possible, such as setting up direct debits or standing orders. Late payments will have a negative impact on your credit file. This means if you need to consider financing options at some point in the future, a low credit score will limit the options available to you, and these will inevitably be at a higher cost. This applies to some utility costs as well; water rates and energy bills paid late can also affect your credit score.

Be the best example for your children

By taking control of your finances, and setting good examples, you’re giving your children a leg-up onto the positive path of their own money management journey. This means they’re less likely to get into bad debt in their adult years by default, simply by teaching them this essential life skill. Talk openly about money around them and teach them that it’s not a dirty word. Show them how they can earn pocket money, and how to budget for what they want.

Tanya Ibberson’s book, Your Financial Flight Plan – Your guide to taking the fear out of dealing with your finances and growing your wealth is out now on Amazon published by Authors & Co