Think Money: improve financial management

Changing their money management skills for the better is an 'imperative' for households striving to stay financially afloat, Think Money has said.

The financial solutions company's comments follow a recent report from Lloyds TSB, suggesting that almost a fifth of people 'use all of their monthly income on household bills and essentials' - without a penny to spare at the end of every month.

These figures come as worrying news - revealing the extent to which many households are struggling to get by on tight budgets that offer no protection against the unexpected. For example: how would a family in this situation cope if they faced a higher-than-expected electricity bill, or were hit with household repair costs out of the blue?

What's more, it's not just the unexpected that could tip many families' finances into the red. The Spending Power Report revealed that throughout 2011, the cost of essentials increased by 4.9%, whereas incomes rose by an average of just 2.6%. This could spell difficulties for many households, as their monthly salaries fall behind the basic cost of living.

This situation could be tough enough; yet for households repaying debts, it could be even harder. People who fall behind on their debt repayments could end up facing fees and charges, a damaged credit rating, and even CCJs (County Court Judgments) - which could lead to a whole new range of financial problems.

However, there are approaches any household having difficulties with their finances could take, in an effort to improve things.

One practical starting point is drawing up a successful budget. This could help households keep track of where all the money they earn actually goes every month - so they could account for every penny and ensure it's well spent. Furthermore, a carefully planned budget could highlight areas where money can be freed up and put into a savings pot or towards important financial commitments.

Taking some time to review their finances could also help families to turn their back on any 'bad habits' they've fallen into - e.g. spending more than they can afford on non-essentials - and work towards a more financially sound future.

For more advice about dealing with debts, a debt adviser could offer some expert guidance and debt help - such as a debt management plan or other financial solution - for people who need it.

Think Money website: http://www.thinkmoney.com/debt/
Debt management section: http://www.thinkmoney.com/debt/debt-management/