Welcome to personal finance from Best UK Mortgages, we know how hard it is to get a good deal on all types of products so we have added all the information you need to get your finances sorted in the UK.
Governments and businesses need to manage their finances, they take stock of earnings and expenditures, and make painstaking plans to balance budgets by reining in debt and increasing profits. People need to do this too and at times it can seem almost as complicated as when large institutions do the books.
An understanding of personal finance is essential to leading a comfortable life and ensuring adequate funds for your eventual retirement. Demographics indicate that the current “pension bubble” will burst within a generation and those without a personal retirement plan will likely live their old age in poverty. This highlights the importance of financial planning in other words, personal finance. By managing your own income and borrowing as a profit-minded company would, you have a much better chance at meeting future financial goals.
As all companies do, the first step is to sit down and compile a balance sheet. What are your assets, your home, car, shares, bank account etc. and what are your liabilities, credit card debts, loans, mortgages? The difference between the two is your net worth.
This balance sheet works as a diagnostic starting point for your financial planning. Based on it you can set future goals, both short and long-term.
For those with negative equity (debts greater than assets) the first priority is to sort out their budget and work to eliminate debt. This means not only not borrowing more, but cutting down on other expenditures. Debt consolidation may be a way to lower interest payments. No matter what, debt can create a negative spiral and must be addressed first. If you are in a position of positive net worth you can start making plans for investment. This doesn’t mean throwing money at shares, however. Do your homework! As well, even those with fit finances can probably trim some fat from their budget.
Personal financial planning is a lifetime project. As such, you must take into consideration inflation and taxation. Plans should also be re-evaluated annually to account for new circumstances.Clear-cut goals are the lynchpin of a good financial plan. Whether planning for a Spanish holiday next year, your child’s education, or early retirement, you must set a budget and stick to it. Once you have the ways in mind, you can begin researching the means.
Investment can take innumerable forms, but of the conventional ways of investing a lump sum, such as shares, ISAs, and property some are more suitable for different situations than others. For the risk-averse investors, there are savings accounts, ISAs, and certain gilts and bonds. For the more daring, there are shares and investment funds. Bear in mind, however, that even in low risk investments there always remains a pitfall—the risk of not earning enough returns to meet your financial goals. Information on financial planning can be found on the Financial Services Authority website, and for extensive financial planning help it is advisable to consult a professional financial adviser.
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