We unknowingly mark our lifetime with big, financial changes; houses, starting a family, retirement. Whatever you are looking forwards to, your financial security is crucial for your future and unhealthy behaviours could be impacting what you could achieve.
A budget is simply a way of structuring your financial life. A budget is extremely important for looking after your financial future, but more than that, sticking to a budget is the real trick. Drawing up a monthly budget will allow you to keep track of how much you have outgoing but also has the potential to open your eyes to how much you could be saving.
Ignoring your outgoings could also be considered a threat to your financial security. This is when you know you have an outgoing payment but aren’t sure when or aren’t sure for how much. As a result, you might default on a payment. 2019 reports highlight that the credit card default rate is at a two-year high, with 22.9% of individuals defaulting on their payments. This highlights just how many people are currently living outside their means and practice poor financial planning. Living budget free could encourage reckless or unnecessary spending. Living budget free makes it extremely hard to keep track of your finances and how to schedule to spend, and save, your money. It is important to build up a financial cushion as it could help you protect yourself in an emergency, without the assistance of a payday loan or other urgent funding.
Whilst it is important to draw up a monthly budget of anticipated expenses, an unhealthy habit that could be affecting your financial security is neglecting to budget for “one off” expenses. More often than not, these are the expenses we forget to include in our monthly budget and do not financially plan for. We call them ‘one off’, despite them being a regular, annual payment. Common ‘one off’ expenses include:
- Car Payments (MOT & Insurance)
- Gifts and Christmas time
- Memberships that renew annually
Whether you are saving for an emergency fund, a retirement pot or your first home, forgetting about these standard outgoings could threaten your financial security. A default payment as a result of poor budgeting could impact your eligibility for mortgages and impact your credit score.
There are so many tools, apps and resources that could help individuals plan out their budget. Researching annual payments and using the free tools available to everyone could help you protect your financial security moving forwards.
Understand Your Financial Data
Your financial data could influence the future milestones we all want to make it to. Financial data is a reflection of your fiscal behaviour, usually without any qualitative information. A study by Experian highlights that 19% of people find their financial data confusing and 9% of people are scared of it. This suggests that individuals ignore or are not aware of the effect their financial behaviour could be having on their future. Similarly, they are not aware of how to control, protect or even nurture their financial data, namely their credit score.
It’s important to be proactive about your financial data, too. That all starts with educating yourself on your financial information. The same Experian study highlights that 16% of people believe they have no influence on their financial data. This is simply not true. Over time, you could actively improve your financial profile but, perhaps more importantly, you could also learn to protect your information from fraud by securing your data. It all starts with learning about your financial data.
1 in 20 people are in debt or struggling with their finances. The Money and Mental Health Policy Institute highlights in 2019, the link between mental health and debt is higher than ever. In fact, 1 in 4 of those suffering with depression are in debt.
This is largely owed to the uplifting or ‘quick-fix’ effect of impulse buying or ‘retail therapy’. Evidence shows that this could be a destructive financial behaviour that could be threatening your financial future, forcing panic-buyers and payday purchasers to turn to unsustainable or multiple loans which could lead to an unstable financial security. It could be a vicious cycle though and that is where the real threat comes in.
We all love to buy something special and treat ourselves. Planning for this is something that could be included in an effective monthly or annual budget as a ‘buffer’ or a ‘splurge fund’. Responsible planning for impulse buying could keep it in check and normalises the ‘fun’ spending. Alternative ways to avoid impulse buying and protect your financial security include;
- Stick to a strict supermarket shopping list
- Ask yourself if you’re bored, need to spend the money to improve your wellbeing.
- Organise your social media to stop lusting after purchases you do not need
Working Down Your Debt
It might feel easier to bury your head in the sand or avoid your debt payments, but it could be impacting your financial security and your future. Being passive about your debt could be extremely harmful. If you do not make a conscious effort to work down your debt or consistently pay your bills off, you are likely to be committing unsustainable behaviour that threatens your financial future. For example, short term loans charge a high interest, which for many may mean unachievable repayments.
If you use unsustainable methods for paying off your loans or find yourself paying them off erratically (in large sums which eventually push you further into debt), you could be negatively impacting your future. It is vital to engage with your finances to ensure you deal with them in a realistic way.
A study shows that a quarter of British adults do not have a savings account. According to the 2018 investigation, most Brits claimed that clearing their debt was the reason they did not have a substantial savings account, highlighting the importance of realistic budget management. Moreover, a savings account could work alongside realistic budget management to help build towards a healthy financial future. Getting into the habit of spending our pay-cheques on debts or necessary monthly outgoings means we have limited savings for a rainy day. This could threaten our future financial stability as there is no nest-egg to rely upon in a financial emergency. If you have avoided saving or made the conscious decision to spend/splurge rather than put some money away, you could have an unhealthy relationship with money that could impact your financial security.
To protect your financial security, you could work out how much to put into savings based on a percentage of money left over after necessary monthly payments. This means it will fluctuate, realistically and change if your income increases as a result of a pay rise or other circumstances.
Ignoring your financial security could be one of the most threatening and harmful things for your future. It could lead to last-resort financing options and other unsustainable methods of gaining capital. Educate yourself and protect your financial security, today!
Wizzcash is an emergency loan lender and not a sustainable means of financing. We supply short-term loans for emergency financing situations to help you in an unexpected emergency. If you budget effectively, you should be aware or prepared for all outgoings. If you do experience an emergency, you can get in touch with us to find out more and understand your financing options.