There’s never a bad time to improve your money management skills, and even small changes can make a big difference.
Are you someone who finds it easy to budget, pay off debts and build up savings? Or do you struggle to make your wages last the month and find it hard to resist the temptation to splurge? If it’s the latter, do you feel comfortable with the way you deal with your money or would you rather have a little more control?
If you’re after more control, there are several steps you can take to help you manage your finances more effectively. Here’s what you need to know.
1. Know your bank account inside out
Check your bank statements every month, so that you have a clear idea of exactly what’s going in and what’s coming out each month. Sometimes seeing in black and white exactly how much you spend on different things can provide just the impetus you need to change your spending patterns. It also gives you a chance to spot any fraudulent transactions.
2. Tackling debts
A good starting point if you’re looking to get your finances on track is to focus on paying off your debts and reducing the amount of interest you’re paying on the money you owe.
The most efficient way to pay off debts if you have several charging different rates of interest is to pay the most you can afford on the one that’s charging the highest rate of interest first. Pay the minimum on the rest, without breaking the terms of the agreement. Once that one’s been paid in full, work your way down the list.
If you’re struggling to pay off your debts, it’s definitely time to get independent and professional advice from a recognised debt advice charity.
There are several debt advice charities to choose from, such as StepChange and National Debtline, or you can seek help from your nearest Citizens Advice Bureau.
The reason why it’s a good idea to get professional advice is that there are certain debts that you should prioritise – such as your rent or mortgage – and others that are not so important. A debt expert will help you work out which you should pay first. Find out more in our guide Six steps to take control of your debts in 2024.
3. Learn to love budgeting
Not sexy, not glamorous, but important – especially if money is tight. If you have trouble living within your means, take out a weekly cash sum and don’t spend more than you’ve withdrawn. Keep your credit card for emergencies as it will only encourage you to overspend. Learn more about drawing up a budget in our article How to make a budget and stick to it.
4. Pay less interest
It may be that you’re not struggling to pay your debts but they’re costing you a lot of money.
If you’re paying a high rate of interest, see if you can shop around for a better deal. Bear in mind you won’t be able to do this if you’re in arrears or have missed payments.If you manage to move to an interest-free deal, you don’t have to worry about how much the credit or loan is costing you, but make sure you pay it off before the deal runs out.
Increase the amount you’re paying towards your debt, if you can afford to. Go back over your budget and it on) to work out where you can make savings or cut back. The quicker you pay off your debts, the less interest you will pay.
5. Build a rainy day fund
The traditional advice is not to start saving until you’ve paid off all your debts and it’s true that there’s no point in trying to save money if you’re struggling to pay debts. However, it may be worth building up some savings, if you don’t have any money saved at all – even if you haven’t yet cleared every penny of debt.
That’s because it can provide you with a psychological boost to know that you have some money available should you need it. Otherwise, if you need money in a hurry, you could find yourself paying all kinds of fees and charges if you go overdrawn without telling your bank or have to go over your credit card limit to pay for an emergency. Find out more in our article How to build an emergency fund.
6. Focus on your money goals
It may sound odd as a good money habit, but thinking about something you’d love to buy or be able to do with your money is a great motivator. It doesn’t matter what it is – it could be a car or a holiday – but use that goal as a motivator for starting to save regularly. You won’t have much for the first few years, but as your savings build and the statements come in you’ll start to feel good about putting a bit of money aside each month. Learn more about the importance of setting goals in our guide How setting a savings goal can help you reach it.
7. Read the small print
Small print is dull. There’s no getting away from it and I’m not suggesting that you have to read every bit of junk mail that comes your way. But if you’re taking out an investment plan, an insurance policy or signing a legal document – it’s important to read what you’re signing up for so that you fully understand what you’re getting into.
8. Play the savings system
Make sure any savings you have are earning as much interest as possible, especially as rising interest rates mean that returns are currently much more competitive than they’ve been for several years. Check websites such as SavingsChampion.co.uk to find the best rates, and you can find lots more information on current market-leading accounts in our Savings and Investments section. If you have a lot of money in savings accounts, make sure you don’t go over the £85,000 threshold for the Financial Services Compensation Scheme (FSCS). Learn more in our article Five ways to boost your savings returns.
9. Give your pension some attention
If you’re paying into a pension that isn’t a final salary scheme you’ll have some choice about where the money is invested. Most of us think that once we’re paying into a pension it’s sorted, but that’s only half the job. You need to understand what your money is invested in. Make sure you are comfortable with the choice of funds. You can do this on your own or with an advisor – whichever you prefer.
You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guide on How to find the right financial advisor for you.
If you’re thinking about getting independent financial advice, financial services company Fidelius is offering Rest Less members a free initial consultation with an independent financial advisor to chat about your finances, where you are now, and where you want to go.
There’s no obligation, but if they feel you’d benefit from paid financial advice, they’ll go over how that works and the charges involved. Fidelius is rated 4.7/5 from over 1,250 reviews on VouchedFor, the review site for financial advisors.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
10. Save tax-efficiently
The amount you can pay into tax-efficient ISAs every year is £20,000.You can split this allowance between a cash ISA, stocks and shares ISA and an innovative finance ISA, which invests in peer-to-peer lending, if you want to, or you can choose just one or a combination of these.
Don’t take on more risk than you feel comfortable with (i.e. don’t invest in a stocks and shares ISA just to save tax) but if you have money in a savings account or you’re thinking of investing anyway, make sure you do it as tax-efficiently as possible. Find out more about how ISAs work in our guide Everything you need to know about ISAs.
11. Plan for the future
There’s often so much going on in the here and now that it can be easy to forget about some of the steps you might need to take to secure your and your loved ones’ financial futures.
If you haven’t already, things it’s worth thinking about include reviewing any protection policies you might have and recognising any gaps, checking you’re on track for retirement, making sure your will is up to date, and exploring ways you might be able to use annual allowances to reduce any potential inheritance tax liability, if applicable. Find out more about forward planning in our articles Am I protected financially?, Retirement age: When can I retire?, The importance of writing a will, and Six ways to reduce inheritance tax bills.
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