Financial Planning week runs from the 3rd - 10th October this year. The annual campaign is organised to help people improve and be more mindful of their personal finances. Financial health can be a complex issue for some individuals, although for the majority there are small, everyday things that we can all do to improve our finances. Adrian Lowcock, heading personal investing, Willis Owen gives some tips.
1. Look for ways to reduce your debt
Debt is one of the biggest causes of financial stress and getting on top of it can help improve your life and not just financially. Make a note of all your debts and the interest rates charged on them. Then work out what savings you have which might be put to better off use paying off the expensive debts. Savings earning 1% interest are not as effective as paying down a credit card bill charging 15%. Speak to your creditors to discuss refinancing options as they might be able to offer a better rate.
2. Find out where your money is currently going
Look at your bank and credit card statements and get in the habit of reviewing your spending each week or month. For cash spending, write them down and keep the receipts. An easy way to keep your monthly costs down is to make a note of each time your utility accounts are due for renewal whether it’s your phone contract, water bill or even your car insurance. Check out what’s available as you could save hundreds of pounds, if not more.
3. Reduce your expenses
Once you know what your expenses are, go through each of them and look for those you can get rid of; Do you need the gym membership and is your phone on the best contract for you? Consider ways to accomplish the same goals without spending as much money such as making your own lunch. When you receive your monthly pay cheque, make sure you pay for the essentials first, such as mortgage payments, food, utilities, followed by your most expensive debt e.g credit cards, before you spend money on eating out or new clothes.
4. Build an emergency fund
Once you have paid off your high interest rate debt, look to build up enough emergency savings to cover 3-6 months of living costs in case you were to lose your job. This will take time to achieve so focus on the habit, more than the amount initially. Put as much as you are comfortable with saving in a separate bank account.
5. Use your ISA allowance
The ISA allowance for an adult is £20,000 and operates on a use it or lose it basis. Any savings and investments can grow free of tax inside the ISA wrapper. Whilst the benefits might not be significant in the early years they can add up pretty quickly. Saving into an ISA is a great way to build a habit of saving rather than going into debt. Instead of paying for everything through debt only buy something once you have saved up enough to afford it. Get into the habit of saving first buying second.
6. Teach your children how to save and spend wisely
Good financial habits start early on in life so it is important to teach your children why they should save and the value of money. As always, it all starts with setting a good example. A piggy Bank can help children relate to saving, but they also need to have goals, a reason for them to save.
7. Get your estate in order
Having a will in place is an essential part of financial planning, but one too many people avoid. A will is especially important if you have a partner and/or children who are dependent. Speak to a solicitor as they are experienced at producing wills and thinking of all the possible eventualities. Tell your family that you have a will and inform them of your wishes.
Adrian Lowcock, Head of Personal Investing, Willis Owen says:
“Looking after your finances does require extra work, but the rewards for investing a little time can be huge and not only improve your bank balance but also help to reduce stress.”
“It is not about doing everything in one go, just make one small change to begin with and focus on doing that really well. For example, reviewing utility bills could be a quick, easy win to demonstrate the importance and value of taking control of your financial future.”