Are you bad with money? Do you have a massive stack of unopened bank statements in a pile by the toaster? When you use a cash machine, do you refuse the offer to see your balance on screen, to avoid getting an upsetting glimpse of your financial reality? If so do not fear: this is how most people feel about their finances. But it doesn’t have to be this way. Get to grips with money management and start making small changes and you’ll quickly see a big difference. And don’t tell yourself you’ll begin when you have more time / cash or have become an expert hedge fund manager: start today and begin reaping the rewards.
Step one: start budgeting
Budgeting is much like brushing your teeth: unexciting but essential. You won’t know what you need to change if you don’t know what’s coming in and going out. Take the bull by the horns and compile a list of your essential spending – your housing costs, essential bills and groceries – along with a list of your discretionary spending (pretty much everything else).
Step two: start paying down your debt
Debt is a big drag on your prosperity. Carve out enough money in your account to pay down the most expensive debts, those with the highest interest rates as quickly as possible; you can use a zero percent balance transfer deal to do this interest-free on your credit card. Commit to spending within your means so you can steer well clear of overdrafts in future and request your credit report to see if there are some easy repairs that you could instigate (like querying incorrect details).
Step three: save on your “must-spends” by switching
Schedule half an hour in your diary to study your various contracts and policies. This includes insurance (car, home, annual travel) as well as utilities such as energy and broadband. Make a note of when current deals come to an end, then pop a reminder in your phone three weeks before to phone up your provider (this is the optimum time to make savings). Do a bit of old-fashioned haggling before investigating money comparison sites to see if you can get a better deal. And kill those lingering direct debits you don’t use or forgot all about!
Step four: get canny with your food shop
Price-compare your trolley online, buy reduced items after their best before date and create a “capsule” fridge with cheap ingredients like beans and pesto that can go into multiple healthy meals. Do it yourself; make planning and cooking meals non-negotiable, as it’s far cheaper and healthier than takeaways. And cutting back on your restaurant, pub and coffee shop outings won’t turn you into a friendless zombie – but it will free up much-needed cash.
Step five: start saving
Most people think they haven’t got enough income to start squirrelling away savings, but as you keep studying your budget every month, you’ll quickly notice those economies adding up. Open an instant access savings pot and get at least three months’ wages in there for emergencies (such as a broken boiler). Then ask; can I live on 90 per cent of my income? Aim to put 10 per cent in the best-paying account on the market. Remember that your savings will have to earn more than the inflation rate to give you a real return.
Step six: check in regularly
If you really want to improve your everyday finances, simply making time in your diary each week to review and research your options would be a terrific start. Your journey to financial whizzkiddery starts here: go get ’em!
Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.