Starting to manage your money better doesn’t have to wait for a New Year’s resolution. A few simple changes right now can get you on track towards better money management and make a massive difference to your routine finances.
A recent article penned by Portafina advises on becoming more financially comfortable and better positioned to cope with unexpected financial hurdles. Here are their 10 Commandments for money management.
- Shop Around For Better Deals and Special Offers
Paying over the odds for utilities, insurance, or other services can significantly hit your pocket over time. However, how do you know if you are overpaying for something?
Shopping around and trying to find cheaper alternatives can help you make significant savings. Don’t only glance at renewal letters, then throw them in the bin. Check whether your payments have risen, and even if they’ve stayed the same, search for cheaper suppliers.
It is straightforward to find a cheaper option for almost anything. There are comparison sites for everything from mortgages to utility suppliers. However, despite the ease with which people can compare suppliers, 41% of us do not take the opportunity to do so. So many people are throwing money away, needlessly, every month.
- Get On Top Of Your Debts
One of the first rules of successful money management is getting on top of your debts. Having the burden of significant debt hanging over, you can make everyday life stressful and challenging to enjoy.
Interest rates on debt can make it challenging to clear, so it should be your priority to get on top of your debt as soon as possible. Any cash you have available, use it to make overpayments. These additional payments will gradually reduce the amount of interest you pay, making it easier to clear your debts completely.
If your debts are becoming too much for you to handle, you should consider speaking with a debt counsellor. They will be able to help you make a plan to get back on track.
- Put Yourself First
Everyone wants to lend friends a family a helping hand. However, this is often done at the expense of oneself. Over half of Brits (56%) of 18 to 45 year-olds have savings to which their parents have contributed. Perhaps of even more significance is that around 52% of UK parents have gifted their children with at least £5,000, with no expectation of ever seeing it returned.
While looking after your family and children is admirable, it should not be done to the detriment of your financial well-being. If giving something away is likely to harm your position, particularly your retirement, you should consider not doing it. It is OK to put yourself first now and again.
- Invest As Well As Spend
It can often feel like your money goes as quickly as you earn it, so there is never any chance to put some aside into an investment. One solution to this problem is to invest some money before you have the opportunity to spend it. Setting up a direct debit into an investment account is a way to guarantee you will always have something being put aside for investments.
There are various methods for you to invest your cash. One of the best ways for short-to-medium-term investment is a Cash ISA. The interest rate you get on this type of investment may not be great, but it provides a tax-efficient means of investing your money.
You can put up to £20,000 into a cash ISA each year without having to pay any tax on any interest earned. Before taking out an ISA, you should check to determine what length of notice you will need to give before accessing your money. If you think that you’re going to need the money, or you want it as an emergency fund, ensure you have quick access.
Another way to minimise tax on your retirement funds is to unlock your pension’s power. You are eligible for tax relief on all your pension contributions up to £40,000, or equivalent to your salary if lower. This tax-relief is at the highest marginal rate. As your pension is locked until you reach fifty-five, boosting your compound interest in this way can give your retirement fund a considerable boost.
- Maximise Your Resources
Establishing a budget and sticking to it can be challenging. What makes things worse is the temptation to have something straight away and use a credit card to purchase it.
However, budgeting can be incredibly rewarding, particularly if your thrift helps get you back into the black with your finances. Budgeting, ultimately, provides you with peace-of-mind, and you can start doing it quickly.
The first thing you need to do is set up your direct debits and standing orders to come out of your account as soon as your income arrives each month. Doing this will allow you to see exactly where you are with your monthly finances and how much you have to spend. Having got this clarity, you can use a budgeting application to help organise your spending.
- Use As Much Free Money As You Can
There may be no such thing as a free lunch, but there are chances to get some free money. One such occasion is when you get offered the opportunity to enroll in a workplace pension schemeC. This type of pension comes with the benefit of your employer making contributions into your pension pot, too, at no cost to you. This aspect sets workplace pensions apart from other savings tools.
These contributions add up to a considerable amount over your working life. They can leave you with thousands of extra pounds when you come to retirement. Think seriously before you sign out of your workplace pension – you could be saying no to a lot of free money.
- Plan For The Unexpected
Planning for unexpected financial occurrences is something that everyone should do. Incidents such as your car taking a knock or boiler breaking down can happen at any time and without notice. Establishing an emergency fund can help you deal with such a situation. Try to build your fund up to cover three to six months’ worth of expenses.
- Tidy-Up Your Finances
Keeping the different aspects of your finances separate will make things easier to manage. Consider placing money for your bills in one account, spending money in another, and use a third for your savings.
Separating your finances in this manner will allow you to allocate money for each purpose as soon as you get paid. You can set this system up quite easily using online banking.
- Become Conscious Of Your Online Spending
The cost of staying up-to-date with the latest online technology can be considerable. Movie streaming, mobile phone data, or applications makes it easy for online spending to mount up quickly.
You should try to avoid becoming wooed by enticing introductory offers, as this rate can rocket at the end of the initial period. You should regularly review your online spending to ensure you are not missing out on potential savings.
- Get Your Pension Working For You
Regularly saving into your pension pot is a great idea. However, you should also periodically review your pension to ensure that it’s on track to achieve what you had planned. Reviewing your pension early and often will give you plenty of time to adjust your savings should you need to account for underperformance.
Conclusion
Hopefully, abiding by these ten commandments will help you improve your money management.
