Making your money work for you is common personal financial advice but how do you actually do that? Over the last few years, we have seen that the economy can be unpredictable, and although you can’t control it, you can focus on your own personal finances and manage that well. Here are just 6 money mistakes to avoid that should help you on the journey:
1. Not putting money away for retirement when you start working.
That moment when you leave education and start working life, it can be incredibly tempting to spend everything you earn on things you want. However, now is the perfect time to start saving for retirement. Get ahead by preparing for the future when you won’t be earning but still need to support yourself. It may seem far off, but those years creep up faster than you think. Starting a pension fund now can save you from having to sacrifice more of your hard earned money later to ensure you have enough to live off when you retire. Makes sense right? All companies in the UK have to offer a pension scheme to their employees. Don’t be tempted to opt out, it is an opportunity to pay in a smaller amount each month, with your company contributing a sum too and it works in your favour long term! Here’s a tip: Don’t think of retirement savings as money you consistently put away, that you never get to spend, think of it as money you get to spend later. It’s worth it!
2. Paying the minimum balance on your credit card or loan
If you only make the minimum repayment on your debt each month, it could take you years to pay off your debt and you would incur possibly hundreds our thousands of pounds in interest. Our best tip to use your money well, is to set up a direct debit to pay off the entire debt monthly. However, if that is not possible within your budget, pay off as much as you can and certainly more than the minimum repayment which is often set at a very low level. In the months when you are most flush, rather than spending that extra money, put it into your credit card to bring the balance and the interest down.
3. Not budgeting
Not having a budget means you are not getting ahead. Getting out of debt, saving for a house or setting aside enough for retirement, all starts with a plan and a budget is key. Putting a budget in place allows you to take control of the money you have and use it well. It helps you to identify where you need to cut back and allow you to set money aside for savings. Our Founder believes that it is not how much you earn that matters, but how much you can keep of what you earn. That’s how you ultimately get ahead with your money.
4. Buying big items because you can!
You may qualify for a huge mortgage or loan, based on your credit rating, but do you really need to be making those big payments every month? Just because you can have it, doesn’t mean you should go for it. It may be wiser to adjust your mortgage or loan so you are not a slave to your payments, keeping them affordable if something drastic happens to your income. Having the biggest and best can seem like the right choice to begin with, but affordability and rational accountability with your money is much more important that keeping up with the Joneses. Seek to live a life of contentment, which can help avoid money stress in the future.
5. Not saving for your emergency fund
Having an emergency fund is secondary to your savings. We suggest accumulating at least 3 months worth of income in your emergency savings, adjusting it as your income changes. This fund is for the times when your car breaks down completely and you need a new one, or you have to catch a flight overseas due to the loss of a loved one, or a family member becomes ill. Unfortunately the importance of an emergency fund only comes clear when the emergency arises, so prepare for it now. All is not lost if you don’t have one, start small and eventually you will accumulate the amount you and your family need.
6. Being reckless with your repayments and affecting your credit score
We live in a busy age when missing a credit repayment could happen to anyone. This can negatively impact your credit score and your ability to get a mortgage or loan when you need it. Setting up direct debits or standing orders avoids any mishaps and you can rest assured, no matter how busy you get, that the payment will be made. If you are late on a payment, rather than miss it at all, ensure that you pay it because even a late payment is better than no payment. Put a plan into place as above to prevent it occurring again.
In our ever changing economy it is more and more important that we learn to manage our money well, so we can look forward to a future without money stress. If you would like to find out more or would like to sign up for our bite-sized money talks, check this out: https://www.twicecampaign.org/money-talks
Disclaimer: The above information does not replace financial advice. Please ensure you seek independent financial advice before making any decisions regarding your finances. We also recommend that you carry out your own research to ensure that this is right for your own unique circumstances. Please note that we sometimes link to other websites but we cannot be held responsible for their content