Taking the time to manage your money better can really pay off. It can help you stay on top of your bills and save £1,000s each year. You can use these extra savings to pay off any debts you might have, put them towards your pension, or spend them on your next car or holiday. Read on for money management tips, including how to set up a budget, sticking to it and how to save.
How to set up a budget
The first step to taking control of your finances is doing a budget. It will take a little effort, but it’s a great way to get a quick snapshot of the money you have coming in and going out. Over half of UK households keep a regular budget. Most of those who do say it gives them peace of mind about how much they are spending, and makes them feel better about life in general.
Setting up a budget means you’re:
- less likely to end up in debt
- less likely to get caught out by unexpected costs
- more likely to have a good credit rating
- more likely to be accepted for a mortgage or loan
- able to spot areas where you can make savings
- in a great position to save up for a holiday, a new car, or another treat
You can set a budget up using a spreadsheet or just write it all down on a piece of paper. There are also some great free budgeting apps available and your bank or building society may have an online budgeting tool which takes information directly from your transactions.
Getting your budget on track
If you’re spending more than you have coming in, you need to work out where you can cut back. This could be as easy as making your lunch at home, or cancelling a gym membership you don’t use. You could also keep a spending diary and keep a note of everything you buy in a month. Or, if you do most of your spending with a bank card, have a look at last month’s bank statement and work out where your money is going.
Set a savings goal
Some people find it hard to get motivated about saving, but it’s often much easier if you set a goal. Your first step is to have some emergency savings – money to fall back on if you have an emergency, such as a boiler breakdown or if you can’t work for a while.
Try to get three months’ worth of expenses in an easy or instant access account. Don’t worry if you can’t save this straight away, but keep it as a target to aim for. The best way to save money is to pay some money into a savings account every month.
Once you’ve set aside your emergency fund, possible savings goals to consider might include:
- taking a holiday without having to worry about the bills when you get back
- having some extra money to draw on while you’re on maternity or paternity leave
- buying a car without taking out a loan
Investing your savings
As your savings start to grow, you can:
- Put more money into your pension. It’s a great way to make sure you’ll be able to live more comfortably later in life.
- Make an investment plan based on your goals and time frames.
Source: MAS July 17