It is a new relevant new term in the world of personal finance in that, people are saying “enough” to so called impulsive spending. Which causes financial stress or worry, uncertainty, regret on an instant decision, whim or spare of the moment decision.
So instead people are trying to channel that money into building some kind of saving habit or pot of fund. Which can improve their finances and they will use that money at a later date.
As we have seen in the UK in recent times, inflation has failed to meet the Bank of England target of 2%. So this has resulted in items becoming more expensive to purchase year on year, this could be food, eating out, leisure activities, household bills etc.
All of the above has resulted in the so-called cost of living crisis, that we have experienced in recent times. Quite simply, some people have had enough trying to keep up with the Joneses, friends and work colleagues to portray an image considered to be normal. The vast majority are swimming in debt, whether that be car finance, credit card debt, hitting their overdraft each month. However through, they may give an illusion that all appears to be looking rosy to the outside world.
So how can I get started !
The key take-away is to change your mindset first, from splurging on impulse to saving. This may appear very simple to do, but if you have been a spendaholic or shopaholic for many years. It could be relatively hard to change that mindset, that you have had in place for many years.
You may become worried about your own personal situation in future, or the economy as a whole.
- Is your current financial situation getting worse ?
- Are you in some kind of debt situation, which is spiralling out of control !
- Do you live pay check to pay check each month, and in a never ending cycle !
- Ask a simple question, do I really need this item and what added value will it do for me at present, will it makes things better or it a short term fixation.
- If you are going to spend say £ 100 on any 1 item, consider delaying the buying of that purchase for say 24 hours, it may reflect if you really need such item.
So getting started and changing your mindset, is key and fundamental when starting out. So make a decision today, to improve your future financial situation.
It may be the best financial decision that you ever make !
So what action can I take !
It can be really simple steps or actions that you decide to take such as:
- Go from splurge to purge
- Commit to “low buy” or “no buy products”
- Create an emergency fund to assist with any unexpected costs
- How are you emotions affected or linked to your finances
- Create a simple budget – where does all your money end up going
- learn to pay yourself 1st – whether that be each payday or set date each month
- try and automate any bills, saving that you have and track them over a short period
- ring fence your accounts, 1 for bills, foods, travel etc, and another for savings.
If you are going to save or invest, create a separate account that you don’t touch. (unless for emergency until you have an adequate amount in an emergency account). Learn to create a financial cushion or buffer to eliminate any undue financial stress, if you suddenly have to pay out for car repair, damage or repair in the home, unexpected bill or annual premium such as home or car insurance. If you have the money set aside it could avoid using expensive credit cards, or taking out short term bank loan.
Start off by saving small amounts, it could be £ 50 or £ 100 each month. Or it could be a specific % of your income, and as you become more accustomed or used to savings. Increase that amount at regular intervals, say the start of a new calendar or tax year. Or if you are given an annual pay increase.
Learn to create financial goals !
By setting down some guidelines, ideas and figures and writing them down in visible place. It gives you some perspective about what you want to achieve in the coming months. It will help you massively as you can see some progress.
It not only acts to spur people only to reach their next target or milestone, but the sense of achievement or accomplishment on reaching a goal should act as incentive to reach your next target.
- Short term goals – within the next year: learn to take action and create a simple emergency fund, or savings accounts in a tax-free wrapper such as Cash ISA.
- Medium goals – next 3 to 5 years: could be for wedding, home improvements, exotic holiday, new car so what we call big ticket items.
- Long term goals – over 10 years away: this could be becoming mortgage free earlier than expected, or the idea of future retirement goals, savings for children etc.
What other factors should I consider !
- Learn to invest money within tax free wrappers, such as ISA or pensions.
- Enrol into your workplace pension through something called Auto-enrolment. If you contribute your employer will top up with free money and gov.uk will add tax-relief. (see blog post for greater information: https://moneyminted.co.uk/auto-enrolment-pensions-a-basic-introduction
- If you are married or have a partner, discuss your finances and get actively involved with them
- Simplify the number or credit cards, bank accounts that you have. Have 1 credit care and 1 debit card that you can easily manage.
- Create separate savings or investment accounts, for ease and specific purposes.
- Invest in your company pension scheme to fund your later years, it’s highly unlikely you will be able survive on future UK state pension. Currently £ 11,973 per annum due at age 66, although this will soon increase to 67 and and 68 in future years. Again see blog post about the UK state pension: https://moneyminted.co.uk/what-happens-if-i-defer-my-uk-state-pension
- If you have any missing pensions, try and locate them. https://moneyminted.co.uk/how-to-find-a-missing-pension
- Use budget calculators to assist you in future
- Create a simple spreadsheet, to see where your items are going each month – you will be surprised at where you money is going.
- Can you stop any subscriptions or old directt debits that you no longer use to improve your financial situation.
Hopefully this blog post, has planted some seeds and ideas to improve your financial situation for the immediate future and your upcoming plans in coming years.
The hardest part for most people is taking that 1st step and and taking action and changing your mindset. But nobody should acre more about your financial future than you. However though for the majority its inertia as we aren’t taught about finances at school or our early years as the subject is considered somewhat taboo to discuss with other about.
Remember:
If you found this blog post useful and informative. Check out my other pots on savings, pensions, investing and recommended investing books on https:moneyminted.co.uk
You can reach your financial goals and investing aims if you create an action plan and think long term.
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