Personal Finances

Personal Finances

A Short guide

OCN Group has prepared a brief guide to help you, and especially the younger generations, ensure your finances are well managed and stay in good order. This is by no means a comprehensive guide, and we encourage all savers and investors, old and young, to seek professional advice before embarking on any financial plan.

Budgeting

If you do not know what is coming in and what is going out each month, you cannot control your finances. Setting a budget and recording income and expenditure is the simplest way to ensure you spend less than you earn and do not fall into debt. You will see how much you spend on necessities and how much you are spending on items that are not necessary. This is especially useful if you plan to save for a new purchase such as a car, or deposit for a house, or to bring down existing debt.

Debt and Credit Scores

Taking on debt is a necessary evil for most people starting out in life and wanting to buy a car or a first home. Having a history of being a good payer will increase your credit score and make it more likely you will be accepted if you want to apply for a credit card or borrow money in the future.

It seems that all the financial institutions are encouraging you to borrow money from them, but borrowing is not the issue. Being able to afford the repayments is what matters. Don’t become over-excited if a bank offers to lend you more than you need, or a mortgage provider offers you approval for a more expensive property than you can afford. It’s tempting to go for the biggest and best but taking on too much debt can become a burden that is not easy to shake off.

Clearing Debt

Make a note of all debts you owe and the interest rates you are paying on each. You may discover that some debt is charged at a much higher rate than others — credit cards spring to mind. Aim to clear the borrowing with the highest interest rates first. Consolidation loans can bring all debts into one payment schedule and simplify the repayment process but be careful of hidden costs or extending the time it takes to pay off your debt. It will lead to you paying more overall.

Savings

If you have worked out your monthly budget already, you should be able to decide how much you can comfortably afford to put away each month as savings. Saving is critical to bail you out in the event of unexpected expenses and ensure you have the deposit if you ever want to buy a car or house.

Retirement may be a date long distant in the future, but the sooner you start saving, the more comfortable your retirement will be. Planning for retirement is always easy to put off to another day, but the small amounts you can contribute now will grow enormously over the many years before you need them.

Start Investing Sooner

Each day you delay starting to invest directly impacts how much profit you can generate in the long term. Stock markets go up and go down, sometimes by considerable amounts, but by investing for the long term, you can ride out any volatility and have funds to spend on the things you enjoy later in life.

Don’t rely on friends who say they have a sure winner or get rich quick scheme as very rarely do these ideas work out, and losing money at the start of an investment plan is hard to recover.

Always seek professional advice from a competent professional that can tailor an investment plan to your specific circumstances and goals.

However you choose to invest, be it direct equities, cryptocurrencies, mutual funds, or something else, diversification is crucial. The adage of ‘don’t put all your eggs in one basket’ could not be more accurate than when applied to investing. Many factors affect the value of your investments, and all must be considered if you are to build a genuinely diversified portfolio over time.