It’s no secret that finances feel more and more stretched every day at the moment. Getting to grips with money is essential, whether you’re looking for ways to get out of your overdraft, grow and develop a small business, or you’re looking for personal fulfilment and success. Being able to handle cash will allow you to focus on the things that matter to you, without the looming cloud of money-related stress hanging over you. This isn’t the kind of stuff you’re taught in school, right? So, exactly how might one go about fixing one’s financial life?
After being told my whole life that ‘money doesn’t grow on trees’, working in banking, and then for an independent financial adviser, I feel like I’ve got a good all round and sound knowledge of how to keep on top of ‘every day’ money. I check my bank account regularly, am always looking at ways to cut costs and ways I can make money.
Create a Budget and Stick to It
Financial stability tends to be built on a firm foundation – and this foundation is called a budget. Make a list of all of your income and expenses, and decide which areas of discretionary spending can be dispensed with. You can do this using pen and paper – but in the modern age, there are plenty of apps and software tools that make budgeting easy, too.
Meal planning can be a huge advantage – you don’t then overspend at the supermarket and end up with wasted food. You’ll often be surprised how a daily coffee or buying lunch for work every day can add up to £100s too. Sometimes your outgoings can vary if you don’t pay fixed prices for things like utilities so ensure you factor that in if that’s you. All these little things can make such a huge difference!
Pay Off Debt Strategically
If you’re faced with debt, then it’s vital that you have a strategy for paying it off. You might use the snowball method, which involves reducing the balance of your debt as quickly as possible. Or, you might prefer the ‘avalanche’ method, which involves clearing the high-interest debts first. The faster you can pay down your debts, the less you’ll ultimately end up repaying. Often, you can bring many different debts together using debt consolidation loans. This will not only make your financial life simpler – it might also help you to reduce the amount you pay in interest because when paying off debt you want to hit the capital!
Build an Emergency Fund
If you have a small pile of cash to draw upon in emergencies, then you’ll be able to absorb the bumps in the road ahead. In most cases, having access to around six month’s worth of expenses is adequate. I completely appreciate this is not always an option but do your best to save what you can.
This will allow you to avoid going into extra debt, when you suffer a setback. If you’re working for yourself, or your income is unpredictable, then having this additional buffer might be critical.
Invest in Your Future
Once you’re comfortable with what you have it may be worth putting aside a portion of your income so that it can work for you. This might mean investing in an ISA, so that you can enjoy tax-free interest payments. Or, you might invest in gold, stocks, crypto, or any number of other assets.
A pension pot, or a savings account for your children or grandchildren, might be a worthwhile investment. Typically, it’s best to focus on the things that you’re passionate about and that might bring you joy in the short term, too. A collection of vintage synthesisers, for example, might make for a great store of value. Of course, if you’re a small business owner, then you might already know how to put that spare cash to work.
What do you do to ensure you’re trying to keep financially stable in an incredibly volatile time? It’s so hard to predict and everyone is feeling the pinch in their own way.