1 – Set clear financial goals
We all have dreams about where we’d like to be in the future. These can be your reality with the right financial planning.
Think about what you want from life. This involves assessing what you want, both in the short term and long term. Ask yourself, ‘How do you define a happy future?’ Next, think about what you can do to achieve this. Consider your income, savings, investments and overall net worth. How can you work with these to one day live the life of your dreams?
2 – Keep track of your pensions
Before retirement, you’ll need to think about your financial provision in your later years. To do this, try to get an idea of your existing retirement income. Have a look at your existing defined benefit or direct contribution pension scheme and your state pension statement, and add up your savings and investments. Helpfully, the government has a Pension Tracing System which keeps track of any pensions from old employees you might’ve lost.
3 – Save up for something amazing
With careful saving, doing the things you love in life will be more than just musings – you can really do them. That trip of a lifetime, the car you always wanted… you name it. With the right approach, you can do it.
Planning your savings is a great way to do this. It’s worthwhile sitting down to work out how much you will need to save to do this. Next, set a realistic date by which you think you could save this amount. Split the cost of your dream purchase by the number of months until this date and put this amount into a savings account each month. Consider setting up a monthly standing order.
4 – Live in the now
Planning for the future is important. However, you should balance your long term goals with living a fulfilling, happy life in the present. Saving hard is all very well, but you shouldn’t let it stop you from living a content and fulfilling life.
Treating yourself is important. As they say, variety is the spice of life. Don’t get caught up by constantly scrimping for your future. Make sure that any long term goals you have are sustainable.
5 – Keep an eye on your daily spending
In an era of contactless payments and online shopping it can be incredibly easy to lose track of your spending. When you can’t visibly see the money disappearing from your wallet, as you could in a simpler age, overspending is easily done. What’s more, the time-lag between making a payment and the merchant sending that information to your bank means that there is usually a few day’s delay before payments appear on your online banking statement.
Keep a tab on what you’ve already spent each day. This is a great way of stopping relatively small purchases adding up. If you find this hard to do yourself, there are some useful apps to help. Monzo is an app linked to a Mastercard, which you can top up from your main bank account. Not only does the app display payments immediately, it also allows you to break down your spending by area, such as eating out and activities.
6 – Don’t be idle about your savings accounts
Make sure you’re getting the most out of any savings you have. Take time to shop around the different options and don’t let the paperwork deter you from opening an account at a bank with a better savings account. Over a few years, having a savings account with a higher interest rate could earn you hundreds or – if you have larger savings – thousands.
7 – Prioritise debt repayments over saving
Paying off your debts as soon as you can before you save is, for most people, the best strategy. This is because the amount you pay in interest on money you borrow is more than what is earnt on savings. Money Saving Expert report that someone with £5,000 on a credit card and £5,000 saved is likely to be around £800 a year better off by paying off the debt with their savings.
There are exceptions. For instance, it is not always the best decision for people with student loans to overpay on their repayments because of the particular nature of the conditions on this loan. However, the difference between savings rates and borrowing rates is one way that banks make profit from their customers, so – usually – paying off your debts is a sensible decision.