Tip 1. Rid Yourself of Debt
Ridding yourself of debt is not tip number one because of coincidence; it is because this must be your top priority. Having a large debt or multiple smaller debts can stifle any plans for managing your money better. The more financial obligations you have, the more of your disposable income will go towards paying interest to the lender.
The faster you can clear your debts, the easier life will be. Therefore, consider making overpayments if you can, and be prepared to make small sacrifices in other areas to become debt-free.
Tip 2. Shop Around For Better Deals
If you have direct debits or standing orders set up to make regular payments, then chances are you are paying more than you could be. An automated payment setup is excellent, but you should check what you regularly pay and shop around for alternatives. Changing your direct debit or standing orders will only be a slight inconvenience set against the savings you could make from a switch.
Tip 3. Consider Yourself More
If you are one of the 52% of parents who have gifted their children up to £5,000 without expecting it returned, that is great. While this is an admirable quality, you might want to think twice about being overly generous, especially if it could be detrimental to your retirement plans.
It is okay to consider yourself more and prioritise your financial plans ahead of others. After all, the more financially secure you are, the better position you’ll be in to help out your family.
Tip 4. Don’t Just Spend – Invest
Many people have ideas of saving or investing but never quite get around to starting. Although they commit to doing so, they rely on saving any money they have left at the end of the month. Of course, the problem with this strategy is that many will spend whatever income they have in the month. To have a successful saving or investing strategy, you should allocate an affordable amount of your income each month and ensure it gets saved or invested before you have the opportunity to spend it.
There are plenty of opportunities to save or invest, ranging from short to longer-term periods. Which financial vehicles you choose will depend on the level of access you need to your money and the level of risk you are willing to accept.
If you consider saving some money for short to medium term, you cannot go far wrong with a Cash ISA. Although the interest you will receive will not be fantastic, these are low-risk investments. They also offer you a tax-efficient means of saving up to £20,000 a year, as you won’t have to pay any tax on the interest you make on this amount.
Before committing your money to a Cash ISA, ensure you know the notice period you need to give to access your funds. If you think you might need your money quickly in an emergency, choose one with instant access, or select another savings or investment plan.
For long-term saving and investing, a pension plan is an excellent choice. Your money will benefit from long-term growth and compound interest. You also get tax relief on your pension contributions, up to your annual salary’s value or £40,000, whichever is the lower amount. Of course, a pension is a long-term investment, so your money will be tied into it until you are at least fifty-five.
Tip 5. Set and Stick to a Budget
Setting a budget is relatively straightforward, but sticking to it requires a certain degree of willpower. The enticements of cheap credit, cashless payments, and delayed payments make it particularly challenging to stick to your budget.
However, having the willpower and discipline to stick to a budget will reap significant rewards in terms of money management. Your first step to successful budgeting should be to arrange for any direct debits and other regular payments to leave your account as soon as your wages get paid into your account.
Once you’ve paid those, you’ll have a clear view of the money you have left. You can then allocate a proportion of this remaining money to each of your spending categories, such as food, travel, personal, etc. There are plenty of free budgeting apps available to help you with this if you need some help.
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Tip 6. Don’t Refuse Free Money
You might be reading this thinking no one would ever refuse free money. However, thousands of people are doing this when they opt out of a workplace pension. One of the most significant benefits of a workplace pension is that your employer makes contributions based on at least 3% of your gross salary. You would not typically have these contributions, so opting out of a workplace pension is comparable to refusing free money. Seriously consider this if you are considering leaving your workplace pension scheme.
Tip 7. Plan for the Unexpected
No one can accurately predict the future, and an unexpected event or emergency might just be around the corner. Therefore, you should incorporate the unexpected into your financial planning. Having money set aside for emergencies will allow you to deal with drama such as your car breaking down or the boiler packing in. As a general rule, aim to have between 3-6 months set aside in this fund.
Tip 8. Declutter Your Finances
You would consider storing all your clothes in a single drawer or all your food in a single box, but most people keep all of their money in a single account. Allocating your funds to different accounts will allow you to manage it more effectively, making budgeting more straightforward and boosting your chances of saving. Consider different “pots” for bills, food, travel, personal, savings, and so on. Online banking makes this incredibly easy to set up.
Tip 9. Watch Your Digital Spending
TV, mobile, broadband, apps, and other digital services can be expensive. To entice new customers, digital service providers often offer discounted rates for a set period. However, once that period ends, your payments can rise sharply. Keep an eye on what you are paying and whether you are using the service to the full. If not, consider ending your subscription or shopping around for a better deal (see Tip 2).
Tip 10. Regularly Review Your Pension
Starting to save into a pension scheme is excellent preparation for your retirement. However, it is not sufficient to pay into a pension and expect it to perform to its full potential. Regularly reviewing your pension will allow you to check if you are paying high fees or if your pension is underperforming – both of which will adversely affect the value of your retirement funds. The sooner you start such reviews, the more time you will have to take any corrective action required.
There is no point in waiting to get your finances in order. Hopefully, these ten tips for managing your money better will give you the motivation you need to get more financially organised.
If you are looking at options for your pension, get in touch with a regulated pensions specialist like Portafina or, view the information at Pension Wise.