Top 10 tips for managing your finances

by Guest Contributor

4 August, 2017

By Helen Howcroft, Managing Director at Equanimity 

1. Set a budget

Please don’t groan and I know that it’s boring however it really does work. Setting a monthly / annual budget does enable an individual to manage their money more effectively. We find that clients that have a budget are more aware of what they spend and therefore generally spend less and save more.

2. MoneyDashBoard

Tracking your income and expenditure can be really hard work and is quite boring. However you don’t have to do the hard work yourself. There are now plenty of online apps that do it for you. We particularly like as it enables you to make your own categories for expenditure and allows you to download transactions onto an excel spreadsheet (or similar format). Therefore for those analytical individuals it enables them to analyse their expenditure to their hearts content.

3. When last did you really check your credit card statement

It is quite alarming when you start checking credit card statements as you will identify transactions on them that don’t belong to you. I’ve been charged for a private number plate thanks to the DVLA as well as someone’s cosmetic surgery on mine simply because a member of staff had keyed on one digit incorrectly when processing a transaction. Obviously large transactions should be spotted quite quickly however the small transactions can sneak through easily. So please do check credit card statements regularly. I personally found that using the online budgeting systems such as MoneyDashBoard has enabled me to spot such transactions more easily as it highlights any transactions that it doesn’t recognise.

4. Subscriptions

Direct debits are great as they mean that items get paid for automatically however how many of the Direct Debits linked to rolling subscriptions do you need? Do you really need to be paying for Spotify, Netflix, Amazon Prime and iMusic (don’t get me started on LinkedIn Premium). Lots of subscriptions cost less than £10 each per month but every £10 being spent is £10 less than can be saved for something for you to buy in the future.

5. Shop around

Insurance, utilities costs, bank accounts and credit cards generally cost more each year and can easily become uncompetitive. Shopping around can save hundreds of pounds each year that could be saved for your future instead. We particularly like Martin Lewis’ website MoneySavingExpert as they generally keep their research up to date. Remember that with all the comparison sites they generally get back a “kick back” for any referrals so never solely rely on one comparison site for your research.

6. Discount websites

There are a plethora of websites that can give you discounts off transactions. These can be for either a pre-funded transaction where vouchers are bought at a discounted price with a retailer or cashback is provided on transactions. Using such sites can save up to 10% on the cost of the transaction.

7. Inflation

Don’t underestimate the effects of inflation. Inflation is the amount that items increase in value each year and it can be substantial over a 10 year period. The general rule of thumb is £10,000 in the bank account today will only be worth £6,666 in 10 years time. Not that the £10,000 has actually fallen in value, but it will only enable you to purchase goods worth £6,666 today as inflation will have increase the costs of the goods by the difference.

8. Don’t be scared of the stockmarket

Generally over the long term, ie a 10 year + period, it is sensible to invest money that has the opportunity to grow faster than the rate of inflation. Over the long term investments on the stockmarket or in property have generally outperformed inflation. However with all types of investing things do go down as well as up in value. Any money that you don’t need to get access to for a long time should be inested for it to grow as much as possible. The key thing to remember is that they will fall in value however over the longer term they should grow to be worth far more than money just left in the bank.

9. Don’t underestimate how much you will want to spend in retirement

The most common question I am asked as a financial adviser is how much money clients need to save for retirement. The only way to answer that question is to know how much you want to spend. A rough way of calculating that answer is to take what you are spending now, deduct the cost of mortgage and children. Whatever is left will the amount that you will want to spend in retirement to maintain your current lifestyle.

10. Just start saving

Many people are put off from saving into a pension because they can never afford to save enough. The most important thing to do is to start saving. Unless you start saving you will never have enough. So anything is better than nothing.