On the face of it, turning away from something that feels daunting or scary makes sense. After all, if a wild animal was chasing after you, you’d do everything you could to get away from it. But when it comes to other worries and problems, avoidance only makes matters worse and allows them to become even bigger.
This is especially the case when it comes to money. In financial terms, digging our head in the sand can lead to policies being cancelled, charges being added, services being cut off, missing appointments and in some cases, financial challenges becoming legal issues. So, here are six simple steps to help you pull your head out of the sand and get your finances in order:
Start with a budget
Knowing what you have coming in and going out is essential. How can you know what you can afford to save if you don’t know how much you need to live off? Of course, to truly make a budget work you also have to stick to it. Knowing what budget you’re working with is important, not just for now, but also for the future. If you know what life costs you now you’ll be better placed to know how much you’ll need in retirement and whether you’re on track to achieve it.
Do you have any debts? The cost of loans and credit cards is much higher than the interest you might earn on a savings account, so it’s worth paying off your debts more quickly. If you learn to budget and stick to it, you’ll find that you’re less reliant on credit cards to get you out of a jam or make your money stretch until the end of the month.
Make time to manage your money
Our busy lives can make it harder to find the time to pay proper attention to our personal finances. Yet taking some time now and again to look under the financial bonnet can save you a lot more time and hassle in the long run. Getting into the habit of regularly reviewing your finances, will make it less like hard work and easier to achieve. Set aside half an hour a week to get started.
Is your money working hard enough?
If your hard-earned cash is sitting in a savings account that pays next to nothing, low-interest rates and inflation will gradually eat it away. Look for a better home for your savings. If you have enough set aside for emergencies, consider putting some of your savings into investment funds. Investments normally involve some risk to your capital, but also the prospect of better returns than you can expect from savings accounts.
We have a range of articles and guides on everything to do with saving, investing and managing your finances if you want to find out more.
Streamline your finances
Keeping tabs on how your savings and investments are doing is tricky when they’re with several providers. The task is a hundred times easier if you have everything you need all in one place. Use the platform calculator to find the best home for your money. Most investment platforms make it easy to transfer your ISAs.
If you’ve worked for a number of employers you’re likely to have a number of pension plans with your name on them. Keep records of all your pensions and how much you have invested. If they’re defined contribution pension schemes, you may find it easier to consolidate them into one pension; that way you get to see all your investments in one pension and you’ll have greater control of what you invest your pension in.
Review your savings and investments
Once you’ve done points 3 and 4, set up standing orders into your savings accounts or ISAs. It will be just like any other bill and you won’t even notice the money going out. It doesn’t matter how small the amount is, the trick is to start saving now as compounding will help your savings grow faster. Drip-feeding your investments is a great way to get into a habit and grow money even with modest monthly payments.
Make time to check your investments on a regular basis and ensure that your savings and investments are working hard enough and are on target. This can include making sure your investment platform is the best one for your needs. With costs and charges changing all the time, it’s worth checking our free comparison tools on a regular basis to ensure you’re getting the best deal.
Think about the future
None of us knows exactly what is around the corner but knowing you have savings and investments and your money working as hard as possible, will give you peace of mind. When you’re planning ahead, it pays to consider the unexpected and expected. Do you have enough set aside for emergencies like replacing the washing machine or the car? What about retirement? Will your pension pot cover the cost of your care later in life?
One way to save in a tax-efficient way that doesn’t tie-up your money but still gives you the flexibility is to use your annual ISA allowance. You can save up to £20,000 every tax year in a stocks and shares ISA, allowing you to quickly save a substantial sum that will grow nicely over the years. Most platforms will allow you to save as little as £50 per month into an ISA. Use our free comparison tools to compare fees and select a platform that suits you best.
Photo by Max van den Oetelaar on Unsplash
