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Managing money well isn’t something we’re taught at school, though we reckon it should be! Budgeting effectively, understanding credit and even talking about our money worries can all help create better long-term financial wellbeing. If you’re struggling to keep on top of your finances, it’s never too late to start getting back on track.
This is one that we hear all the time and it’s so true. Getting into the habit of saving, ideally when we’re young and earning pocket money or our first wages, can help us become more financially stable in future. Planning for your retirement when you’re 21 might not sound like a priority (or as appealing as a night down the pub) but when the time does come (and it can arrive sooner than you expect!), you’ll be relieved you created that financial safety cushion. Even if you’ve not saved (or saved much) before, you can start now. Begin by putting aside a small amount each week or month – as much as you can spare. Look at opening a high-interest savings account, ask about your work pension scheme or even consider a private pension. By creating a consistent saving habit it’ll become second nature.
Loans, credit cards, Buy Now, Pay Later, credit lines... with so much choice on offer, it can often feel overwhelming. That's why it’s important to understand how different types of credit work before you enter into any kind of agreement. Take time to get familiar with them, their interest rates, their repayment terms and the implications of borrowing money from credit lenders. For example, can you afford the repayments each month? If you’re unable to keep up, you could find yourself in a debt spiral, where missed, late or hidden fess keep being added on to the amount you already owe, making it harder to get out of debt.
If you’re in that spiral of debt, this is a crucial one. The debt with the highest interest (usually the one with the highest annual interest rate or APR) will be your most expensive one to pay back, so begin by clearing that first and as quickly as you can. You’ll still have to keep up the repayments on any other debts you have, too, but once the most costly balance is cleared, you can apply the same approach to the next one.
This might sound obvious, but you’d be surprised at how easy it is to over-promise and under-deliver on a money goal you’ve set. Life has a funny habit of getting in the way, right? To help you set goals that you can actually stick to, identify and personalise your goals so they align with you. For example, you might want a sum of money to celebrate a special occasion for yourself or a loved one. Or you may have a more high-priority goal, like creating an emergency fund for an unexpected expense, or if you need to cover your rent or mortgage if you lose your job. Having a reason for your goal can really help keep you motivated.
Creating a budget is a great way to clearly see what money you’ve got coming in and what money is going out each month. By looking at your list of incoming funds (ie your wages, any benefits and other forms of income) and your outgoing expenses (bills, rent, mortgage payments and debt repayments) you’re taking a positive step towards taking back control of your finances. Plus, it’s a good habit to get into, we reckon. Start by tracking your spending over the course of a month to get a good idea of where any spare money beyond your bills, rent etc is going. This way you can also understand how you may be able to live within – or better still, below – your means.
Ever bought something when you’ve felt a bit low? Or perhaps you've made a particular purchase to keep up with your friends, or you've bought something you simply loved the look of. Emotional purchases have a canny way of adding up – and fast – delivering a serotonin hit (those happy hormones) that’s short lived. Worse still, if you’re relying on credit to make those emotional buys, you could start to see your debt mounting. Need to keep those spends in check? Delay those impulse decisions by asking yourself first whether you need the latest tech, that new bag, or those festival tickets. Is this a want or a need?
Talking about money usually feels like a bit of a breach of financial etiquette, but it doesn’t have to be this way. In fact, talking about our money worries and asking questions about finance topics we don’t understand is a powerful way to build better financial awareness.
Whether you have mounting debts or you struggle to stick to a budget, ignoring the problem can actually make things worse. Instead, try and confide in someone you trust, or contact an organisation like MoneyHelper or StepChange for confidential advice and support. Whatever you do, don’t carry the burden on your own.
