Do you want to bring order to your financial chaos? Try these 10 rules of money management.

by Startacus Admin

Want to become more financially stable and prepared for the future? These ten rules of money management ought to help...

Establishing order among the mayhem of your money matters is not something you need to put off. There are straightforward measures you can apply right now to get your finances back in shape.

If you want to become more financially stable, and prepared for the future, try following these ten rules of money management.

1. Look out for better deals.

If you have been with your provider or supplier for some time, you could well be paying over the odds for insurance, utilities, and other services. You can see the amount you're paying by checking your direct debits and other regular payments from your bank.

Once you know what you're paying, you can look for better deals using comparison websites or brokers. Only around 40% of people shop around four cheaper energy suppliers. This figure is incredibly low when considering that you can save a significant amount by finding more affordable alternatives.

2. Prioritise debt reduction and elimination.

Large or multiple debts not only cause financial anxiety, but they are an emotional stress too. The stress of dealing with debt means you'll find it challenging to enjoy even the exciting things in life. Therefore, you should prioritise debt reduction and elimination and work towards achieving this immediately. 

When setting out about reducing and eliminating your debts, start with those that incur the highest interest payments. Getting rid of these debts first means you'll have more money left at the end of the month to clear your more minor financial obligations.

Eliminating your debt will take time, so be prepared for this. Don't allow yourself to become overwhelmed, and if you get too stressed, you can consult with a debt counsellor.

3. Put yourself in pole position.

If you are one of the 52% of UK parents who regularly give their children up to £5000, you should consider yourself admirable. However, it is also okay to put yourself in a pole position regarding your finances, particularly your retirement.

Of course, you will always want to help your children out. However, you should consider how you'll be able to do this if you jeopardise your financial retirement plans. After all, if you were financially secure when you retire, you'll be in a better position to help out your kids.

4. Don't just spend; also invest.

It often feels like you've spent the money before it even reaches your bank account, so investing may be the furthest thing from your mind. However, what if you could invest some money automatically before you have a chance to spend it?

There are plenty of opportunities to invest your money, ranging from short to long-term investments and those with low or higher degrees of risk. Setting up automatic payments to leave your bank at the start of the month will ensure you make regular investments for your future.

Cash ISAs are an excellent savings vehicle for the short term. Although the interest rates are not exceptional, they are a tax-efficient way of saving. You can save a maximum of £20,000 annually into a cash ISA and not pay any tax on any of the interest you make.

If you think you might need to recover your money quickly in the event of an emergency, check how much notice you need to give before opening an ISA account. That's because some of these accounts require you to lock your money in for a certain period.

For long-term savings, the most common savings vehicle is a pension. Investing is an important part of how your pension works, check out Portafina. There are considerable benefits from saving this way, including tax relief on contributions up to £40,000. With a pension, your money is locked in for decades, and you cannot access it until you are at least 55. However, your funds will benefit from compound interest during this time, which is another excellent benefit of pension savings.

5. Budget effectively.

Effective budgeting takes determination and organisation, which are not easy to apply with so many spending temptations. However, effective budgeting will help keep your head above water and provide you with financial peace of mind.

Your first step should be to organise your direct debits so that your bills get paid as soon as you do. Doing this will allow you to understand how much you've got for the remainder of the month. 

You can then divide this money into different categories to keep track of your spending. There are plenty of budgeting apps and online tools available to help you with this aspect of her finances.

6. Never refuse free money.

This rule might come as a surprise to you, as you might be thinking there is no such thing as free money. Of course, this is the case, but you do have opportunities to accept money that you would not typically get.

Such a case is with workplace pensions, where your employer makes payments to your pension pot to top up your personal contributions. The schemes also qualify for tax relief, so money that would typically go to the government goes to your retirement savings.

These are two examples of free money that you would be unwise to refuse. Therefore, ensure that you remain within your workplace pension scheme.

7. Plan for unexpected events.

Budgeting for your routine spending is an excellent start to getting your finances on track. However, what happens in an unexpected event or an emergency? 

There is nothing more frustrating than having to fork out on unexpected expenses such as car repairs or replacing broken appliances.

However, these things will happen at some stage. Therefore, you can prepare for them by establishing an emergency fund. Ideally, you should accumulate between 3 to 6 months of living expenses and keep the money in a separate account.

8. Get financially organised.

A significant step you can take to organising your finances is to separate your money into different accounts. Having your money altogether means there is a risk of you spending some that you should allocate to other things.

For instance, you could have one account for everyday living expenses, another for bills, one for travelling expenses, and so on. You can allocate a certain amount of your income to each spending category, enabling you to manage your money more effectively. Having a separate account for savings will make it easier for you to put some money aside for the future.

9.Watch your spending on digital technology.

Spending on digital technologies such as mobile phones, broadband, or the latest gadgets can quickly spiral out of control. Many of these products come with enticing introductory offers, but the price rises shortly after the initial period.

Consider whether you use these products and services sufficiently. If not, consider unsubscribing or looking around for a better deal. Try to avoid deals where you defer payment to a later date. Remember, there is no such thing as free credit, and you could be stung by high-interest charges.

10.Regularly check your pension performance.

If you have a pension plan, that is an excellent start towards saving for your future. However, it is not sufficient to let the scheme run on its own. You should regularly check the performance of your pension to ensure it is living up to expectations.

Underperformance or high charges could be having a detrimental effect on your pension fund. If you fail to check it, you will not have the opportunity to put things right. Therefore, regular check how your pension is doing and take appropriate action.

 

 

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Published on: 16th February 2022