The long-term benefits of managing your money (and how to do it right)
From buying a home to rainy day savings, understanding how to protect the pennies is key to long term success and security
Financial planning is a tricky topic for many of us. We all know we should be keeping tabs on our savings and spending, but many people still end up falling back on the old ‘cross your fingers and hope for the best approach to wealth management.
In fact, according to FinCap, 39% of UK adults don’t feel confident managing their money – which equates to around 20.3 million people. What’s more, 11.5 million people have less than £100 in savings, and almost 9 million are in serious debt.
Effective wealth management – through careful planning and smart investments – can change your life for the better. Here are some of the main benefits of managing your money.
The benefits of wealth management
Take control of your money
Most obviously, having a good budget to fall back on provides a sense of confidence and peace of mind that cannot be underestimated. It gives you the assurance you need to enjoy your money without relying on a ‘spend and hope’ approach.
Focus on your financial goals
When you’re not worrying about your day-to-day spending, it gives you the time to plan for your future and work on objectives you’d like to meet – whether that be a house move, a new car or preparing for your child’s future. It may also be about making the money you have work harder for you, generating an additional revenue stream or passive income.
Stay on top of your spending
Most of our regular purchases are now set up via direct debit or standing order. This is convenient, but it does make it all too easy to lose track of what money is going where. Laying out all of your expenses clearly will help you plan better and identify areas you can save, whether it’s a phone contract, an energy provider or something else.
Know your debts
Financial planning isn’t all about the money you’re spending, it’s about the money you’re saving, too, of course. Knowing what you have in the bank, and what debts you still have waiting to pay, will give you the confidence you need to spend without worry.
Save for unexpected costs
Life isn’t straightforward, and even the most stringent financial plan can be scuppered by a broken boiler, a flat tyre or loss of income. But having a careful budget in place does help to take the sting out of unexpected bills by giving you a safety net to fall back on.
Be confident when talking money
People can get cagey when the subject of money is raised, but knowing your finances well means you can practice open and honest communication. It gives you the assurance you need to be able to say when you are able make plans with family and friends, and when you need to tighten the purse strings.
Uncover problem areas
Like anything else in life, when it comes to money troubles it’s always best to be proactive rather than reactive. A good budget can show you the potential risks to your financial stability before they become an issue, allowing you to nip them in the bud and avoid a big fallout.
Know what you can borrow
Sometimes, borrowing money is inevitable. However, financial management can still help in this regard. It lets you know exactly how much you need and how much you can afford to repay. Having confidence and knowledge about your money will also stop you from finding yourself in a challenging situation further down the line.
How to master financial planning
The most important factor when it comes to financial planning is transparency. In order to make the most of your savings, you must have a clear idea about where you stand, including how much you have, what your outgoings are, and how much you’re earning. Once you know exactly where your money is going, you can start to review which purchases are necessary, where you could be budgeting and what you have available to invest in other areas of interest – be that property, a pension or the stock market.
By carefully managing your daily spending, you can look at making smart investments for long term gain. Investment advice can help you with this, so it’s a good idea to consider an independent financial advisor who can help you navigate the tricky world of money management. This is a great way to get peace of mind and total clarity, offering expert and impartial guidance centred around your needs. Financial planning can be difficult, but you don’t need to struggle alone.