When planning your personal finances it is essential to be organized and realistic. You may just wish to balance your monthly or annual budget, but most families have some longer term objectives. These can include a new house, health care, retirement plan or the children's education costs.

Monthly or Annual Budget

Personally I think an annual budget makes more sense and is easier to organize as it irons out the fluctuations in costs such as heating, car expenses and house insurance.

This is very easy to do, simply make a list of all expected income for the year and another list of expected expenses and hopefully the income will exceed the expenses! If this is not the case, you have two options, either increase your income or reduce your expenses – easier said than done!

You could increase your income by finding extra work or perhaps borrowing against your assets – for instance re-mortgaging your property if you have a lot of equity tied up in it.

You could perhaps reduce your expenses by shopping around and finding better deals for your power supplies, insurance and telecoms. There are a number of comparison sites out there, so it is worth a bit of effort if you can get cheaper deals.

Remember things can change over the course of a year so it is important to revise and amend your budget as and when required.

If you are in the happy position of having more income than expense, the next step is to decide what to do with the money.

Savings

There are many different schemes that will be happy to look after your surplus income. These range from the simple easy access deposit account, which has the advantage of getting your savings back to meet an unexpected expense – the return will not be very high – to the various Isis and offset mortgages.

One of the best schemes is the offset mortgage. Under this scheme you link your savings account (s) and current account to your mortgage account and only pay interest on the outstanding amount at any one time. For example if you have a mortgage of £ 100,000, savings of £ 8,000 and a current account balance of £ 2000, you will only be paying interest on £ 90,000. The added advantage of this scheme is that you can take your savings back at any time.

Cash ISAs (Individual Savings Accounts) provide the opportunity for tax free savings and this is a great boost to your finances and should not be overlooked.

The other major tax free saving provider is National Savings and Investments.

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