The pandemic is a reminder that none of us knows what is around the corner. While it’s brilliant to be spontaneous sometimes and to believe in seizing the day, it’s also beneficial to be proactive in managing your money. In this guide, we’ll explore some steps you can take for a more secure financial future.
Budgeting and saving
Budgeting is one of the simplest and most effective ways to take control of your money and tighten your grip on spending. If you don’t already live by a budget, you may be surprised at the difference it can make. To create a monthly budget, you can use financial apps, a spreadsheet template or a notepad. Write down in separate columns your income, your regular outgoings, for example, rent or your mortgage payment, and one-off expenses for the month ahead. When you’ve entered the data, you can figure out how much money you have left over.
Drawing up a budget can help you control and limit spending but it can also provide an insight into where your money goes. It’s very easy to spend money these days, with direct debits, mobile payments and the ability to order almost anything at the touch of a button. Going through your transactions and noting down frequent payments may highlight areas where you could make savings or even cut costs completely. Good examples include subscriptions or memberships you may not use or even know you had.
Once you have calculated your disposable income, you can set out spending budgets for different expenses, such as buying food or going out, and work out how much you can afford to save or spend on clearing debt. If you’re eager to reduce spending, it’s wise to try and cut expenses. If you usually spend $50 at the grocery store, for example, try setting a limit of $40. Small savings add up if you implement them across the board and stick to restrictions in the months ahead.
If you have money left over after you’ve paid your bills, try to put some aside. You can save for specific reasons, for example, a wedding or a new car, or add to a fund for emergencies or rainy days. If you set up a direct transfer to your savings account on payday, this will ensure that you’re saving regularly.
Life insurance and preparing for the future
Nobody wants to think about the day they depart this earth but sadly, death is a reality we all face. If you have dependents, or you own assets, such as property or a business, it’s essential to make sure that you take steps to protect your family and your investments. If you don’t already have life insurance, use the Internet to compare prices and policies. You should also ensure that you have a will. If you made a will a long time ago, and your circumstances have changed, review and update it to make sure that it still fits with your wishes. Some people also like to plan their funeral and set up a plan to cover the cost. While this is not an appealing proposition for some, others want to make sure that they have everything planned from the choice of music and the funeral home to the cemetery grave markers used. It’s a matter of personal preference but if you do want to be able to pay for your own funeral, it’s wise to plan ahead and set up a fund or a payment plan.
Creating an SOS fund
It’s impossible to know what the future holds. Even if you have a great job, a stable income and promising career prospects, there are no guarantees that life will be plain sailing in terms of your finances. Creating an SOS fund is a means of providing a cushion if things don’t go to plan, or you find yourself in a position where you need access to funds. From losing your job and paying for medical care to repairing your home or covering the cost of treatment for a much-loved family pet, there are endless reasons why you might need to dip into an emergency fund.
If you’d like to start saving, you can set up a new account and transfer money on a regular basis. Shop around for the best savings accounts and top up your balance if you have a bumper month and you have more disposable income than usual.
Pensions and retirement funds
If you’re in your 20s, 30s or 40s, you might not be thinking about how you’re going to pay for your retirement yet but it’s always beneficial to be prepared. If you have a pension scheme at work, make sure you’re aware of the terms and conditions. You may be happy with the contribution levels but if you want to save more for your retirement, you could set up an additional account. If you don’t have a pension through work, start saving for your retirement as soon as you are able to. Even if you can only put a small sum aside each month in your 20s, every little helps. If you’re not experienced when it comes to pensions and retirement planning, it can be confusing to know what to do for the best. If you have questions, or you don’t know where to start, don’t hesitate to contact a reputable financial adviser. Experts can explain how different systems work and help you explore options that are best suited to your circumstances.
If 2020 taught us anything, it’s that we have no idea what awaits us. When it comes to managing money, it’s beneficial to think about the future and to try and take steps to make your financial situation more secure. Start budgeting, keep a close eye on your finances, invest in life insurance and make sure you have a will, set money aside for emergencies and seek advice about pensions and retirement funds. There’s nothing wrong with seizing the day but it’s helpful to be prepared and to have your finances in order.