Top tips for financial success
Financial success doesn’t come easy. Making the decision to overhaul your finances is a little bit like deciding to get fit – the sooner you start, the better off you will be! At Eastern Financial Consultants we have looked at our top tips for financial success:
Start a budget and financial calendar
Set reminders to save for important events. We all know there are times of the year when the purse runs low, so plan for it. For examples; paying a tax bill, car MOT, Birthdays and Christmas. Make sure you have put money saved to cover these events that you know recur on an annual basis.
Setting a budget
Setting a budget should be your starting point for every other goal in life. Do you spend more than you earn? Major overspending can lead to debts spiralling and severe problems. Once you know what you are spending, you can start to prioritise what you do with your money to enable you to stick within your means.
There are some great budgeting tools and apps available for free, or even traditional paper & pen is a good starting point. List all sources of income, then all outgoings. It helps to categorise, for example household bills, car, health, children. Remember to include the items you have already established from drawing up your financial calendar, as these are often missed when looking at a normal weekly or monthly budget.
In an ideal financial success world the result should be a positive one, you can then work out how you can enjoy the remainder. However, spending more than you earn can lead to a downward spiral. In a nutshell it means you can’t afford your lifestyle. Unless you take steps to change your spending habits, it can over time affect your family, home, mental health and relationships.
Cash is king!
If your budget reveals you are overspending, revert back to cash. Payments through electronic transactions has increased year on year, although do you know how much you spend on your debit card? All too many of us pay for goods with our cards without taking stock of how much we are actually spending.
A great trick to get this under control is to revert back to cash & watch your spending change. Suddenly with the cash in your hand, what you spend is reality and has a big impact on what goes into that shopping basket!
Saving & Investing
Tackle debts first
Before you can consider saving, you need to tackle your debts first. Target debts with the highest interest rate shown on your monthly statement or loan agreement first. Ensure that you wont be charged any penalty or default charges for overpaying, then pay off as much as you can afford without breaking the terms of other credit agreements you may have. Once you’ve cleared your most expensive debt, move on to overpaying on your next most expensive one.
Luxuries Vs Necessities
A key starting point for financial success is knowing the difference between your luxuries and what is a necessity? This may sound simple, however we all have different views as to what is a luxury. For some that £3 coffee on the way to work is a necessity, but saving £3 every day adds up to £1092 a year! Is a bought lunch a luxury or can you make it at home for less?
Setting up an emergency fund
An emergency fund is an account used to set aside funds needed in the event of a personal financial dilemma. Examples include:
- Loss of a job.
- Debilitating illness.
- Marriage breakdown.
- Death of a spouse.
A good rule of thumb is to have 3 months essential outgoings available on an instant access savings account. You want to get your emergency fund set up as soon as possible. As with all savings, its best to keep to what you can afford and make sure you save regularly. Work out how much you need to put aside and set up a regular standing order for the right amount.
Investing for your future
Once you have established your emergency fund, it is time to start thinking about saving for your future.
Perhaps now is the time to see an Independent Financial Adviser to discuss your saving and investing goals. A financial adviser can help you plan to achieve financial success, through regular monthly saving into an investment.
Eastern Financial Consultants provides Independent Financial Advice for Investing, you can contact us using our online form to arrange an initial consultation to discuss your requirements. It is important to remember the value of investments and the income from them can fall as well as rise. Past performance is not a guide to future performance. You may get back less than you invested as investment returns are not guaranteed
Review your pension, mortgage and insurances
Check your mortgage to save
Check you have the best possible mortgage deal. This could literally save you hundreds of pounds a month. A common example is where you might have finished a fixed rate and reverted to your mortgage companies standard variable rate. The standard variable is in most cases higher than a variable rate.
If you have had your mortgage a long while, you may also find that your loan to value (LTV) has changed. This is the percentage of mortgage, against the value of property. Lenders use the LTV establish bands of interest rates. You may find that you are now eligible for a better rate as your property value has increased, or you have paid more off your mortgage.
If affordable, start to overpay your mortgage, thus reducing the term. You will be surprised at the difference just a small overpayment can make!
You have home, car, even pet insurance, however have you insured yourself? All too often we forget ourselves. You and your wages are your most important asset. Don’t forget this and make sure you are insured against ill health or death.
If you already have this cover, review it! Many of us take out life insurance or protection with a mortgage then forget about it. In many cases, circumstances change – you may have moved jobs, had children, divorced, so actually your cover may not be at the right level anymore.
Many bigger companies offer valuable staff benefits, such as pensions, savings schemes and staff discounts. Find out what is available in your company, you can often make significant tax savings!
Start a pension or increase your contributions
Finally, it’s never too early to start saving into pension. Many people in the UK either aren’t saving at all for their retirement or they aren’t saving nearly enough to give them the standard of living they hope for when they retire.
Did you know the maximum basic state pension is far below what most people say they hope to retire on? You can check to see what you might receive at the Government’s check your state pension website.