by Costas Chryanthou

Created on: July 31, 2008

Paying off debt is certainly the number one priority of any person with personal finance issues. The expensive interest charged on debt on a personal basis is perhaps the biggest killer that can occur. Once debt has paid off the feeling is good, and the way to do this systematically is to pay off the more expensive debt first until it is all paid off. Similarly there is no point in having 10,000 of debt and having 10,000 in savings in a current account. The banks are effectively laughing at people in this situation. The cost of debt far outweighs the interest earned through savings. The best approach here is to pay off all debt first and then use what ever money is left in the current account.

Secondly it is good idea once the debt is cleared, to invest some money each month or in a lump sum to a high interest savings account. This is to make best use of available cash at a low risk. The use of interest bearing savings accounts are that the level of interest paid is far greater than leaving cash left idle in current account earning little or no interest.

Switching saving accounts might also be another good idea if the level of interest paid by another bank or finance institution offers a high rate of interest. The effect is that people are able to maximise their capital invested. People can these days search online to find the best paying providers at ease.

Daily budgeting of monthly income and outgoings will also help to control the spending much more better than if left to chance. People using budgets will know what they are spending their money on and non essential itemised spending can be reduced or eliminated. The savings made each month can amount to being able to invest in high interest accounts and going on a vacation as a treat.

Selling new and second hand items on ebay or amazon will help earn a few pennies by getting rid of unwanted products.

Those with higher risk thresholds are able to invest in stocks and bonds though the level of income and capital growth is not guaranteed and stocks carry a wealth hazard warning.

Longer term personal finance involves saving for the future in the form of pensions. This is an area of finance that I do not know much about other than a set level of monthly payment is made over a given fixed period of time (usually from the start date of the plan until retirement). Generally the returns are not great though it offers some level of income upon retirement. The wise people who have pensions will no doubt be thankful they did invest as they will have a nest egg to help pay some of there day to day expenses. Some might have a pension and this might not be enough which in some respects down to bad planning and in not doing the budgeting at an earlier stage of life.

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