Protecting your pennies doesn’t have to seem like an impossible task…
When it comes to your finances, the temptation might be to bury your head in the sand. You might think we all have enough to be stressing about right now, and adding your financial security to the list isn’t exactly a tempting prospect.
But in reality, tending to your finances is a way to relieve stress, not add to it. By getting on top your spending habits and feeling like you are in control, you can improve your financial security. That is the key to moving yourself into a more secure and stable position over the next 12 months.
With that in mind, we’ve put together this list of some simple ways to get your financial security on track. From setting goals and smart investments to seeking out independent financial advice, here is everything you need to know right now.
Build an emergency fund
Building up an emergency savings fund will provide you with a stash of money to see you through any financial shocks. In recent weeks, we’ve all learnt the hard way how things can take an unexpected turn, so it’s important to have a safety net in place for situations such as losing your job. A good emergency fund should be able to cover around three months’ worth of expenses, giving you a financial buffer and peace of mind.
Put a sensible budget in place
Of course, in order to start an emergency fund, you’ll need to first save money, and this means putting a carefully considered budget in place. A monthly budget will help you feel more confident about your money, putting you in greater stead for saving for the future.
How much you save and how much you spend is up to you, but a common model is the 50/30/20 rule — spending 50% of your earnings on essential expenses and 30% on discretionary expenses, while saving the remaining 20%.
Consolidate high-interest debts
Debt can be like a dark cloud hanging over your head, especially if you’re making plans to save and get your finances in order. Prioritise paying off high-interest debts first, such as credit card debts, as soon as possible as these are the debts which can really hold you back.
One option is to consolidate high-interest rate accounts via a single personal loan. This can help you lock in a lower fixed interest rate, saving you money in the long run.
Investing can be scary for anyone without the experience, but it’s also an effective way to get your money working harder for you – particularly when interest rates are low and any savings you have are maturing very slowly. Providing you do the research and seek out independent financial advice beforehand; there’s no reason you shouldn’t be able to benefit from smart investments.
Increase your income where possible
This will depend on your circumstances and daily routine, but there may be room in your schedule to bring in a bit of extra income. If you find yourself with more free time than funds, consider putting some of your hobbies to good use by picking up a few freelance opportunities. Are you a good writer, photographer or graphic designer?
Remember that while furloughing prevents individuals from working for their primary employer, it does allow you to engage in new working opportunities. More information on the specifics of the Government’s job retention scheme can be found at www.gov.uk.
Avoid emotional spending
Emotional spending is the money you spend on fleeting wants and desires rather than needs. Of course, sometimes treating yourself is warranted, but it should be something you really want rather than something that’s just taken your fancy for a moment or two. Before making a purchase, asking yourself whether you need it or just want it? If the answer is the latter, consider waiting a day or two to see whether you still really want it in your life.
Like anything else, financial management works better with a bit of focus. Setting yourself annual financial goals, including targets for saving, will help you stay motivated. Just make sure these goals are reasonable so you have a good chance of actually meeting them.
Seek out advice
If the idea of getting your financial security in check still feels overwhelming, know that you don’t have to go through it alone. Seek out expert independent advice tailored to your best interests.
If you’re looking for investment advice, or simply need help managing your finances, the team at Carrick Financial Management can support you. An independent financial advisor can offer expert and impartial guidance centred around your needs.