Achieving better money management that helps boost your wealth doesn’t have to wait until you have lots of money. You can start right now with what you’ve got and start noticing the financial benefits straight away.
Whether your motivation is to have some extra spending money each month or build up a significant savings pot, better money management will help. Read on to discover ten simple money management tips that can help boost your wealth.
1. Search for the best deals.
There is a good chance you could be paying over the odds for your utilities, insurance, and other services. If you don’t check your renewal notice carefully, you could find your tariffs have shot up without you noticing.
Go through your direct debits and other regular payments to check what you are paying. Then, compare prices with a broker or comparison site.
You’ll likely find a better deal, and some people do this regularly. However, over 40% of people don’t bother looking for cheaper alternatives, despite the opportunity to make considerable savings.
2. Prioritise eradicating your debts.
Eradicating your debts will put a significant amount of money back in your pocket rather than going to the lender. Large or numerous debts can have a devastating effect on you financially and emotionally. They will make it challenging to make plans and enjoy life. Therefore, clearing yourself from debt should be a high priority.
When paying off loans, start with those with the highest interest rates. Doing so will free up more monthly money to eradicate the lower-interest obligations.
Becoming debt-free takes discipline, and it will not happen overnight. If you start to feel overwhelmed by your debts, consider speaking with a debt counsellor.
3. Put yourself first.
Wanting to give your family financial help is a natural and noble quality. Indeed, more than half of the U.K.’s 18 to 45-year-olds have savings contributed to by their parents. Also, around the same percentage of parents have given their children up to £5000 without expecting it to be returned.
Of course, you will want to continue helping your family. However, it should not be at the expense of your financial security and retirement aspirations. Therefore, consider putting yourself first on more occasions.
4. Don’t just spend; invest as well.
Many people respond to this statement by saying they would like to but never have any money left to invest at the end of the month. Granted, if nothing is left, you have nothing to invest. However, what about if you made your investment at the start of the month when your pay arrives in your bank account?
Allocating some funds before you’ve spent everything means you can start saving and investing for the future. A cash ISA is an excellent investment vehicle in the short to medium term. You can invest up to £20,000 annually into an ISA without paying tax on your gains. Some of these accounts require notice to access your funds. Therefore, you should check the conditions before locking your money away for longer than you anticipated.
For a long-term investment, there is nothing more suitable than a pension. Pensions are basically long-term savings plans, but with the benefits of tax relief on your contributions. Also, your pension savings will receive many years of compound interest growth, giving your funds a significant boost. Check out Portafina for expert and regulated financial advice to help you plan for your retirement.
5. Create a realistic budget.
An excellent routine to ensure you stay out of the red is to create a realistic budget and maintain it. Effective budgeting takes willpower, especially with accessible and inexpensive credit available.
Part of your budgeting should be arranging regular monthly payments to leave your account as soon as your salary arrives. Doing so has two benefits. Firstly, you will understand how much money you have left. Secondly, you will ensure you pay your essential bills while you have plenty of money in your account.
6. Don’t refuse “free” money.
There are not many situations in life where you get something for nothing, and the term “free” money isn’t totally accurate. However, when you enrol in a workplace pension scheme, you will receive money that you would not typically receive otherwise.
Your contributions to the workplace pension scheme amount to around 4% of your gross annual salary. This figure is matched through a 3% contribution from your employer and a further 1% in government tax relief. If you were to opt-out of the scheme, you would not receive these additional funds. Consequently, you would lose out on thousands of pounds of “free” money each year.
7. Plan for unexpected events.
Many people’s financial planning is centred around their long-term future and retirement. However, have you ever considered how you would cope in an emergency or if something occurs out of the blue?
For instance, are you financially prepared to replace a broken boiler or pay for significant car repairs? One way to prepare for such events is to establish an emergency fund. As a general rule, you should aim to build up an emergency savings fund that would cover you for around 3 to 6 months of living expenses.
8. Organise your finances.
Organising your finances will remove much of the stress of money management. Consider setting up different accounts in line with your various spending categories. You can also have an account for your savings and one as an emergency fund.
Compartmentalising your finances in this way makes budgeting more straightforward, as you can keep track of where you are overspending. It’s easy to set up different accounts using a mobile banking application, so you can start immediately.
9. Remain conscious of your digital spending.
Spending on phones, broadband, mobile applications, and other digital services can be costly. Many people get lured into spending on services they don’t entirely need through attractive introductory offers. However, after the initial period, the amount you pay can rise sharply. Therefore, ensure you remain conscious of your digital spending and win initial introductory offers expire.
10. Ensure your pension is optimised.
Paying into a pension scheme is an excellent start to your retirement preparations. However, it’s not sufficient to do this without keeping regular checks on how your pension is performing.
Failing to review your pension means it could be subject to high management charges and underperformance. Both these could significantly erode your pension funds over time, leaving you short of what you had anticipated for your retirement.
Therefore check your pension regularly to ensure it remains optimised. Consulting with a financial advisor may be advisable to get assistance.