5 ways to manage your money better
Managing your money well can ensure that you’re having fun while still being sensible. Have a read of our main tips to get the balance right and make the most of your money.
1. Paying the basics
Before you start planning holidays make sure you have your essential outgoings paid first each month. That includes rent, household bills, phone bill, council tax…
However boring it may seem to focus on them first when it’s payday, they really ARE the most important things. Be organised. Have a notebook to keep track of your money, or spreadsheets. Everyone loves a colour-coded spreadsheet.
If you’re still not sure what you should be spending your money on each month, try the Money Advice Service’s budget calculator.
2. Dealing with debts
The next most important thing is avoiding unmanageable debts. That means steering clear of credit cards or loans you don’t really need, where you will be charged very high interest so your debt could easily spiral out of control.
- Make sure you know where your money is going – keep a note of all your incomings and spending. This will help you decide where you can cut back if you need to.
- Keep some money tucked away – just in case. (link to emergency fund)
- Be realistic about what you can afford – if there are whispers of redundancy at work, it’s not the time to fork out £800 for a high-definition TV.
- Pay for everything outright if you can – it might seem like a money-saver if you pay for something over a five-year period, but you could end up paying double the price with interest.
- Use standing orders to pay for your regular bills – this will allow you to arrange a specific date for payments, i.e. payday. Once the money has gone out, you can easily see what’s left to spend.
If you do land yourself in some debt, then make paying them off a priority after your essential bills. It can be hard to know which is more important, paying off debts or putting money into savings, but you will lose more money on high interest payments than you’re ever likely to make with most savings. You’ll be better off in the long run if you work harder at ditching the debt.
3. Putting money aside for emergencies
Once your debts are paid off, start saving for an emergency or rainy day. You never know when you’re going to need a cash cushion. A job loss, essential household repairs, a new interview suit or even an unexpected pregnancy can be made easier by keeping some cash to one side. Keep it in an easy-to-access saving account – see our article on setting up an emergency fund for details.
4. More long-term savings
Once the debts are paid off and you have some emergency money saved, think about other ways to save. Although you will be hard pressed to find a savings account paying high interest these days, better rates are offered on accounts where access to your money is restricted.
Boost your savings by taking out a Cash ISA. They work like a savings account, but your deposits won’t be taxed. You can look at Fixed-Rate Bonds too, where you can dump a large sum of money for a long period of time. You can’t make any more deposits or withdrawals but you get a chunkier interest rate for being tied for a fixed amount of time.
And don’t forget pensions. It’s never too early to start saving for your retirement. You can find out more about when and how to start a pension here.
5. Risky investments
This is only for people who have a stable financial foundation first! With riskier investments you might make more money, but you also run the risk of losing the lot. This includes unit trusts, investment trusts and shares in single companies. Don’t be greedy and get sucked in by offers of high returns. Always read around the subject and do your own research before committing to a purchase.