Have the lockdowns made you reconsider your finances? It surely made me reconsider the way I look at money and it has been life-changing.
Getting your finances into shape can seem like hard work, especially if it isn’t something you’ve ever done before. Before you can do anything about your finances, you first need to know where you stand. How much is paid in – salary, interest, pensions etc. – versus how much is paid out. You should be aiming to spend less money than you earn, as having regular expenses that exceed your income could put you in debt.
Breaking things down into simple steps and getting stuck in straight away can help. If you want to get your finances in shape, here are the steps I have been taking over the last year and a half:
Create separate savings pots
Creating separate savings pots will help you prioritise, making sure you have enough money to buy the things that are most important to you. I’ve got a pot for my Future Tiny House, Retirement, Emergency Fund and more.
Save what you can
Many banks now let you round up the cost of each payment and will automatically put the difference into a savings pot for you. Whilst saving the occasional 30p extra doesn’t sound like much on its own, it can quickly accumulate and soon you could be sitting on a good-sized pot of money If your banking provider doesn’t offer this feature, other money management apps or platforms will do.
Switch where possible
Money-saving apps are a great way to review your finances and determine where you can make some savings. For example, are you on the lowest possible rate with your energy provider or would you be able to switch and save some money? Not only can switching free up money for you in the short term but in the long term, you’ll also notice a big difference. Some apps can notify you if you could be getting a better deal by switching from your current energy, bank or other providers.
I cut down our broadband and two mobile phone contracts from a total of £80 a month to a total of £30 a month; £20 for the broadband and £5 each for the mobile contracts (referral).
Get out of your overdraft
Downloading a money management app will help you better identify where savings can be made. An app will send you personalised financial ‘nudges’ based on your spending behaviour and will flag when you can put money to the side to save. Some apps can even give permission to make an automatic sweep from a savings account into a current account to avoid unnecessary overdraft fees. Having that extra eye on your money is an advantage especially as you start to take control of your finances.
Plan for the long term
Once you feel in control of your everyday finances you can start thinking about your long term financial health. Putting a little extra into your pension each month can you stand you in good stead for later life, ensuring that you can enjoy a comfortable retirement. The PLSA’s Retirement Living Standards will help give you an idea of how much you need to save in order to enjoy the standard of life that you hope to in retirement. Consolidating your pensions into one, and having that goal in mind will help you be more focused on your retirement savings.