Managing finances

In managing one’s own finances, it is crucial to learn to balance expenses with the income in use. Budgeting can help with this – meaning planning and keeping track of income and expenses. Living off credit, meaning that a person spends more money than they have, is not sustainable. Sometimes it can be necessary to take a loan. In such a case, it is important to understand the terms of the loan and to ensure the ability to pay it back.

If you are having trouble managing your finances, you should seek help as soon as possible. It is possible to make arrangements with companies for how and when bills are paid, for instance, by changing the due date or by paying the bill in instalments. Even if you are already in debt, help is available. If you continuously do not pay your bills, this will cause a non-payment record (maksuhäiriömerkintä) which can make it more difficult, for instance, to receive a rental home.

If your income is not enough to cover the cost of essential expenses, you should contact Kela. In Finland, the welfare state secures everybody’s essential needs. For example, in the case of unemployment or illness, it is possible to receive social support.

The average price level in Finland is rather high

In a comparison conducted in 2022, Finland was the seventh most expensive country in Europe. Alcohol and tobacco were notably expensive in Finland because they are heavily taxed. Transportation and eating in restaurants were also remarkably expensive compared to the average price level in Europe. On the other hand, at the time of the comparison, energy was slightly less expensive in Finland than in Europe on average.

Budgeting helps to balance income and expenses

A person’s finances are well-balanced when expenses do not exceed income. You should aim to have some money left over for savings. Savings act as a buffer if income is momentarily lower. Savings also make it possible to pay for a larger purchase in one go.

A good way to balance income and expenses is budgeting. First you count how much money you have in use, for example, for one month or one week. This sum is then divided into different types of expenses. First the fixed, mandatory expenses are deducted – such as rent, medicine and obligatory bills. The left-over sum can be divided into other expenses. This tells you how much you can use each month, for instance, on food and free time.

A good way to keep track of your own expenditure is to write down how much money you have spent during a week and on what. This can be done on paper, but there are also mobile applications for keeping track of a budget. This shows you if you have kept to your planned budget. Then you can think about which expenses are truly necessary, if there are some things or services that you could cut back on or if something could have been done with less money. By regularly keeping track of your expenses, you learn to better evaluate what your income can get you and how you could also find money for savings.

It is always important to inspect your own consumption when there are changes to income or expenses. For example, someone with a small income can be exempt from a child’s early education fee, but when income rises, the cost for early childhood education and care also rises. Then the budget needs to be readjusted.

When taking a loan, it is important to consider its fees

In our current society, it is easy to consume by taking out loans. Banks may offer credit cards with tempting benefits. A new television can be bought in instalments. Products ordered online can often be paid for later, for example, next month. The temptation to consume now and worry later can be strong.

When making decisions, it is important to remember that borrowed money is not free. When you take on debt, you make a commitment to take care of future payments and usually also interest. Interest is the price of debt. Sometimes it can be justified to take on debt for a large purchase or to buy a product in instalments. This should always be a well-considered decision. Before taking out a loan, you must always inspect the terms of the loan and consider if you can certainly pay it back.

When taking out a loan, you should at least think about how big the repayment instalments are and if you can pay these for the whole period of repayment. Purchases paid with credit always reduce future consumption. You should always check what the interest rate is. If the interest is high, the loan can be very expensive in reality. You must also think about how long the loan period is. A long loan period means smaller instalments, but the impact of the interest on the overall price is higher.

If you lend money to a friend or relative, it is good to write down the terms of the loan and the repayment.

Taking out a loan when it is carefully deliberated and well justified is common in Finland. For example, homes are so expensive in Finland that only few can buy a home without a home loan. People often also take out loans to buy a car. Debt is not a problem if you can pay it back and the repayment is not too much of a burden on your finances.

Help is available for debt issues

If you have debt and repayment is causing issues, you should seek help for organising your finances. For example, the legal aid office’s financial and debt counselling offers help.

Taking out a new loan to pay off old loans is not a sustainable solution in the long run. If the debt is made up of many consumer credits with a high interest rate, it might be a good idea to find out if there is a reasonably priced bank loan or social lending (sosiaalinen luotto) for debt restructuring. You can apply for social lending from your own wellbeing services county. The Guarantee Foundation (Takuusäätiö) can in some cases grant a guarantee to help receive a reasonably priced bank loan.

More information on financial and debt counselling, Legal aid offices : Financial and debt counselling (oikeus.fi) (Finnish, Swedish, English)

More information on consolidation loans: Guarantee from the Guarantee Foundation (takuusaatio.fi) (Finnish, English)

What to do if you cannot pay a bill?

Sometimes there may be a situation where the due date of a bill is nearing, but you do not have enough money on your account to pay for it. In such a case, you should immediately contact the sender of the bill, for instance, your electricity company. When you explain your situation to the company, it is usually possible to receive extended time to pay for the bill. It may also be possible to agree to paying the bill in instalments.

If the bill is not paid by the due date and you do not make an agreement with the sender of the bill for the payment, the bill may result in debt collection. This means that the original creditor, for instance the electricity company, transfers the management of the unpaid bill to a debt collection agency. The debt collection agency adds collection fees to the cost of the bill. This means that you have to pay more than the bill’s original sum.

If you do not react to payment reminders, the debt collection agency can transfer the bill to the enforcement authorities (ulosotto) for debt collection. The enforcement agency is legally permitted to collect unpaid debts directly from one’s salary or benefits.

If you do not have much money, you should pay your bills starting with the most important expenses. Housing-related costs are always paid first because rental debt can lead to losing one’s home. Electricity can also be cut off if electricity bills are not paid.

In managing your finances, you should be active and ask for help immediately when you need it. Small issues are more likely to grow into bigger ones if you simply do not pay a bill or try to fix the situation by taking high-interest consumer credit.

The video below explains more about bills, debts and agreements.

Video: The Guarantee Foundation Laskut ja sopimukset, Bills and contracts – englanti (youtube.com) (Finnish, English, Arabic, Somali)

You get a non-payment record if you do not pay your bills

If a person in Finland continuously or fully leaves their bills unpaid, they can receive a non-payment record (maksuhäiriömerkintä). This has a lot of bad consequences. Receiving a new credit card is difficult. A person cannot receive a phone subscription or take out an insurance, they need to pay advance payments, and they cannot use instalments as a payment method in shops. Getting a rental home can also be difficult because the landlord usually checks the tenant’s information before renting.

The non-payment record is valid for two to three years. If the debt has not been paid after this period, a new non-payment record can be marked. The record is removed once the person has paid off all of their debt. The record can however affect credit standings on a longer term.

Society can give monetary support for covering necessary expenses

Primarily in Finland, adults have the obligation to provide for themselves. However, no matter their situation, everybody has the right to necessary livelihood. Sometimes a person cannot provide for themselves through work either temporarily or permanently, for instance due to seeking employment, full-time studies, or inability to work due to illness. In these cases, a person can receive financial social support. In these situations, you should contact Kela and find out if you have the right to some benefits.

If the income from work or benefits is small, it may be possible to receive housing allowance to cover the costs of housing if certain terms apply.

Sometimes a person receives some of these benefits or they have a job, but their income and savings are so small that they are not sufficient to cover essential expenses, such as housing and food. In such a case, it is possible to apply for social assistance (perustoimeentulotuki) from Kela. All of the whole family’s income and funds are considered when counting the amount of social assistance. Social assistance is meant to be a short-term aid to help people overcome a difficult situation.

If a person or family has special needs, it may be possible to receive preventive or supplementary social assistance from one’s own wellbeing services county. Preventive and supplementary social assistance are meant to prevent marginalisation and promote people’s independence. This support can be granted for establishing a home or for children’s hobbies.

The video below explains more about the support one can receive, e.g., as an unemployed single parent.

Video: The Guarantee Foundation Etuudet, Benefits and rent – englanti (youtube.com) suomi, englanti, arabia, somali

Benefits paid in Finland are meant for the costs of living for one’s own household. If you wish to support your relatives by sending money abroad, there can be very little left for your own living. You should not lend or send money to others that you need for your own necessary expenses.

You should get online banking credentials for your bank account

A person who moves to Finland needs a Finnish bank account. In Finland, salaries and benefits such as housing allowance are paid to a bank account. These cannot be paid in cash.

When you open a bank account, you need a passport or some other identification. Different banks offer different services with different prices. You should find out which bank is best for you.

In Finland, it is usually possible to receive online banking credentials with a bank account. These allow you to pay bills and transfer money from your account online. Using the online bank is free of charge, whereas paying bills at a bank’s customer service desk costs money and this can also be difficult because of the short opening hours of banks. Most Finnish people manage their banking online. Sometimes a bank cannot grant online banking credentials even if opening a bank account is possible.

Online banking credentials are also important because they can be used for strong identification for many digital services with authorities.

More information about strong identification and digital services in Dealing with authorities.