You don’t have to wait until the new year to resolve to change your life. What better time than now to get to grips with your money management?
Whether you want a little more or to make a significant financial change, sound money management can help you. Money management and planning for the long term financial future is important. Speaking to a specialist and taking on expert advice is helpful. Check out Portafina. Continue to read to discover ten rules for managing your money.
Rule 1. Always search for the best deals.
When renewing regular contracts such as energy, insurance, and broadband, you should always search for the best deals. Simply continuing existing direct debits means your payments could rise sharply without being aware.
As simple as this may sound, over 40% of people fail to shop around for better deals on their energy. If you take the time to do this, you could save a considerable amount on your regular payments.
Rule 2. Prioritise debt elimination.
Having debt can jeopardise your retirement plans and prevent you from enjoying everyday life. Therefore you should make debt elimination a priority.
Once you’ve set this priority, it’s essential to tackle your higher-interest debts first. This is because repaying higher interest debts takes more of your disposable income. Once you have cleared these obligations, you’ll have more money left each month to tackle your lower interest debts.
Dealing with debt can be challenging and takes time. If you start to feel overwhelmed, consider speaking to a debt counsellor. They can give you advice and support to help.
Rule 3. It’s OK to consider yourself.
Helping your children get a financial head start is admirable. Indeed, it is common for British parents to do so, and more than 50% of Brits between 18 and 45 have received financial help from parents. Moreover, over 52% of UK parents have given their children up to £5000 and don’t expect it to be returned.
While supporting your children in this way is an excellent quality, you should not allow it to be detrimental to your retirement plans. Understand that it’s okay to consider yourself in many circumstances.
Rule 4. Don’t just spend; invest.
Often, it can seem that no sooner has your pay arrived in your bank account than it has been spent. There certainly seems little left to invest at the end of the month.
However, what if you made some investments before spending all your money? Investing as well as spending will reap you rewards in the long term.
You have plenty of options available when it comes to investments. Of course, each comes with various levels of risk and return. Therefore, you need to decide which ones are best for your situation.
A cash ISA is an excellent investment for the short and medium terms. Although their interest rates are not spectacular, they provide you with a tax-efficient means of saving. You can save up to £20,000 annually in a cash ISA without paying tax on the interest you accrue. However, ISAs often require you to give notice before accessing your funds. Therefore, you should check this before unknowingly locking up your funds.
The most common form of long-term savings is a pension plan. You can make up to £40,000 worth of pension contributions and receive tax relief. As your pension funds are locked in for the long term, they have an opportunity to grow. This growth is enhanced by compound interest over the years and decades.
Rule 5. Create a budget and stick to it.
You will need willpower to create a budget and stick to it. Indeed, there are so many special offers and easy credit around that you’ll be frequently enticed to break it. However, if you stick to your guns, budgeting will bring you financial peace of mind and prevent falling into the red.
But where to start? Firstly, gather your direct debits and other regular payments, and arrange them to be paid as soon as you do. Doing so will give you an understanding of how much money you have available for the rest of the month. There are tools and applications available to help you with your budgeting, many of which are free to use.
Rule 6. Never turn down extra money
When you enter a workplace pension scheme, you not only contribute; your employer also pays into it. These employer contributions are money you would not receive otherwise. Therefore, turning it down is equivalent to refusing something for nothing. Over your working life, employer contributions to your workplace pensions can amount to tens of thousands of pounds. Can you afford to refuse this amount of money?
Rule 7. Make emergency plans
You must consider what you will do in an emergency or an unexpected event. For instance, how will you pay for the repairs, replacing home appliances, or medical expenses? If one of these arises or an infinite number of other situations, it’s good to have funds to pay for them. That’s why having an emergency fund is crucial. Ideally, it should contain between 3 to 6 months’ worth of living expenses.
Rule 8. Get your finances organised.
An excellent way to organise your finances is to separate your money into different accounts. For instance, you could have an account for everyday spending, another for utility bills, and others for travel, entertainment, and savings.
Once you’ve set up these accounts, you can allocate a certain amount of money to each one depending on your budget – see Rule 5. It’s easy to organise your finances using an online banking application. Doing so will soon get your finances organised.
Rule 9. Remain conscious of what you spend on digital services and technology.
It is easy to lose track of what you spend on digital services and technologies such as broadband, mobile phones, TV packages, and other subscriptions. It is also common for people to get lured into buying subscriptions they don’t need but are convinced through attractive introductory offers.
The problem with such offers is that, after the initial period, the cost tends to rocket. Therefore, remain conscious of what you spend on digital services and technology, and be aware of when your subscriptions expire. When they do, shop around for a better deal – see Rule 1.
Rule 10. Regularly check your pension’s performance
If you’ve started to see it into a pension, that is excellent news. However, you can’t just contribute money and expect your pension to perform as you wish. The chances are, your pension could be performing okay. However, it might not be. Also, it may suffer from high management charges. You should regularly check your pension to ensure it’s performing adequately and your management charges have not become too steep. Both of these things could erode your retirement fund significantly over time.
Sound money management and organised finances enable thousands of people to live an affluent lifestyle. Hopefully, by following these 10 rules of managing money, you can achieve this too.