Feeling overwhelmed by your spending or behind on your savings? Here’s how to take control of your finances and reach your short- and long-term goals.

Determine your goals

To make changes that generate the desired effect, you need to determine your goals. Do you want to get on top of your spending? Are you aiming to wipe your debt? Is your mind set on the future? Find your focus and let this direct your decisions regarding how you use your money.

Create a budget

Next, you need to create a comprehensive budget that covers everything related to your finances. Include your income – minus any deductions such as tax and your pension –you’re your outgoings, splitting these into essential and non-essential spending. Having the details laid out in black and white gives you clarity on the current state of your affairs.

Use your budget to identify areas that could be improved to better your financial health. This might include cancelling old subscriptions and finding ways to be stricter with non-essential spending. Remember to keep your budget updated to ensure it stays useful, updating your salary and spending as and when needed.

Manage your debt

Once you’re on top of your finances, take steps to manage your debt. The high interest on short-term borrowing options such as overdrafts or credit cards can cause once-affordable amounts to spiral out of your control. This negative trend will limit your funds for spending and saving, so you must prioritise paying off money owed.

You could look into debt consolidation loans to bring your debt into one place and set up monthly payments to reduce it all at once. Alternatively, pay off your smallest or largest sums while maintaining the minimums on your other loans, working your way up or down methodically. This method is known as the snowball or avalanche effect.

Remember that long-term loans with a set amount of interest and sustainable repayment plans such as mortgages do not need to be settled before you start saving. These kinds of loans are known as ‘good debt’ and will not negatively impact your finances or credit score.

Develop saving strategies

When you’re in a position to save, be strategic in your approach. Consistency and care are key to making your money work for you.

Set aside a regular amount each month for savings. The exact amount is up to you: many recommend the 50/30/20 rule which separates 20% of your salary for savings but it’s important to keep back enough to cover your essential spending. Start by building an emergency fund to cover sudden large payments – this should be about three months’ salary – before you look to long-term saving.

When you’re ready to put money towards future goals like a deposit for a house or your retirement pot, consider the different types of accounts carefully to find a suitable option. Fixed-rate accounts offer relatively high interest on your savings if you’re happy to have it inaccessible for a set period. UK Individual Savings Accounts (ISAs) offer tax-free savings on amounts up to £20,000.