What actions and steps can you take to greatly get better with your finances for 2027 (the next year).
Ideally the best time get involved with your finances was yesterday.
You can take some simple steps in the coming weeks.To greatly improve your personal financial situation.
Which will not only improve your short term plan for the next 12 months. But these decisions will pay dividends and reward you multiple times in future years.
I say to clients all the time – “nobody should care more than you money than you”
But for the vast majority. It’s inertia as we are never taught about saving, investing personal finance in school at an early age. Or in the workplace by our employer.
It’s outside our comfort zone and it appears confusing and complex.
So let’s look at some simple steps we can take !
Budget planning
Create a simple spreadsheet by tracking your monthly expenses. You will be surprised at where all your money is going.
You will find patterns emerging as to where your money actually goes.
Do yo find yourself struggling each month and are you living pay check to pay check.
Are you forever stuck in a never ending cycle of being in debt or raiding your overdraft monthly.
When you have done this for a few weeks. See if there are any items you can reduce or stop such as unused subscriptions and memberships, are you forever eating out as a simple example.
Imagine the stress free life you could live, if you managed your money and expenses by living within your means.
2. Never pay a bill late
Learn to take control of your monthly bills.
Set up some simple direct debits and standing orders so they are paid on time.
If you have credit cards, do take action to make payments by statement due date. No matter how small, to get into the habit of being in control of who you may owe.
By doing so you could avoid any late payment fees and possible reduce any excessive interest rates charges.
So create a simple calendar or diary to record and monitor when payments are due.
It could also relate to big ticket items such as car tax, and insurance. House insurance, annual oiler service etc.
By doing so you can be prepared for any expenses due .
3. Automate your savings
If you are going to set some money side. Get into the habit of automating your savings journey.
For most people when starting out it appears strange.
But within a short period of time, it becomes 2nd nature. A simple direct debit or standing order can be set up online in a matter of seconds.
I personally set money aside each payday for a particular investment by something called pound cost averaging.
However for my private pension, and regular savings accounts. I have set up a direct debit for the 1st of each month.
So I can just set and forgot !
Make it a habit to pay yourself 1st. The vast majority do it the wrong way round. If they manage to save any money at all. They do it at the end of the month if they have any savings left.
4. build an emergency fund
You should ideally create an emergency fund too specifically meet any unexpected costs.
Such as boiler or car repair, emergency in the home.
They reckon you should save between 3 to 6 months living expenses.
But for the vast majority this is simply impossible and unaffordable.
So make a decision to start off small, say £ 500 or £ 1,000.
You can reach target in a relatively short timeframe.
I personally like to have £ 1,000 set aside in separate account to cover such events. With my wife holding a similar amount.
Remember to hold this emergency fund in an instant account account. Which is separate from other other funds and should only be used to cover emergencies not everyday living expenses or treats.
By taking some action, you can alleviate any undue stress in having to find funds at short notice.
Which could then be subject to excessive lending charges by bank or lender. Or, if added to credit card, could be subject to interest charges.
5. pay off any high / bad debt
Make a conscious decision to get rid of any high interest credit care debt. In that you are paying accruing interest each month, in excess of 20%.
If you are only making the minimum monthly payments, you will never clear that credit.
So try and increase your monthly payments and contributions too clear it quicker.
You don’t have to wait until the statement due date to make a payment. If you make payments more often say weekly, it reduces the outstanding balance or interest due on a daily basis.
Or, if you have a personal loan to cover a car purchase or home improvements. Could you make any additional payments, too clear that outstanding debt quicker to reduce any ongoing interest charges.
So speak to your current lender or do it online to make any additional overpayments.
We have what we call good debt and bad debt.
Good debt – to cover a mortgage, as we need somewhere to live. But it’s at a lower rate of interest, and the house will hopefully increase in value over the many years you own it.
Bad debt – credit cards, personal loans etc – normally at much higher interest rates. Usually for liabilities that reduce in value over time – so it’s a double whammy.
Imagine how live may be, if you could avoid such charges. You could put that sum to better use such as savings and buying investments or assets.
Whereby that money is working for you to improve your financial position.
You aren’t making the banks or other financial institutions richer. Not against you.
6. obtain a credit score
You can get a simple credit score, to show your financial and lending position.
So you can get better deals on financial loans and products in future.
If you can prove that you are making regular payments to cover credit cards and loans, mortgage etc.
You can be seen as reliable to any respective lending provider.
By taking such action and improving your credit score. You should be able to obtain better deals and lower interest rate products in future.
There are numerous free companies to use.
I personally use Credit karma https://www.creditkarma.co.uk
As your credit card score increases, it will give you more confidence in dealing with your outstanding finances moving forwards.
You may even be able to transfer debt to new lender on better interest rate terms or even 0% lending. By doing so you are reducing debt repayments to improve your financial situation.
7. set some goals
Most people have never set savings goals in their lives. As they have never been taught about them.
However though, this could be one of the best financial decisions you ever make.
So start off by setting short, medium goals say the next 3 to 6 months. Such as building as emergency or rainy day fund.
You may also wish to set medium term goals say 1 to 5 years. Such a buying your next car, large home improvement, nice holiday, wedding etc.
You could also consider long term plans, such as becoming mortgage free, retirement or savings for the children future university fees, house deposit etc.
So again create a simple, spreadsheet and play with some actual figures and scenarios.
The starting out may them small, reachable and specific. Gives them dates which you can reach and attain.
As you reach a certain target or milestone, reward yourself in some way.
Then set your next goals and targets. As you reach each target it creates enthusiasm and momentum to spur you on in future.
You will amazed at how well you progress in a relatively short term frame. If you create a simple path to follow.
8.become disciplined/ focused
Again when starting out it may appear overwhelming, complex and confusing.
A simple step is to become disciplined, such as creating some good habits.
Such as getting involved in your daily spending habits, creating goals, tracking expenditure etc, automate your savings, pensions etc.
As your level of confidence improves and you become more financially aware and astute. Then learn to become focused to reach that next milestone, target no matter how small it may be,
You will be amazed when you reach a specific target. In that in that propels your ambitions moving forwards to your next goal.
Take small steps, but see it as part of a long term journey. Break it down into bite-sized chunks.
By doing so you won’t lose interest, and give up.
You can dramatically improve your financial position by taking some decisive action points today.
But stay on track, don’t let small things or setbacks knock you off track.
You will have ups and downs on your journey, but it how you react to them that matters.
9.start investing
Once you have done the basics, make a decision too greatly improve your financial position or net worth.
Ideally if you are setting money aside. You want it to grow and make money by beating inflation.
Most bank accounts or building society products pay very little interest. So, they are in effect losing you money.
Again the world of investing can appear complex and confusing. But they make it appear that way. Or people think it’s only for the rich or wealthy.
Thanks to the introduction of investing APPS and platforms. You can open a stocks and shares ISA in a matter of minutes.
In may start daunting investing at first, but most people are already investing through a workplace DC pension plan. But their provider is investing those monthly contributions on your behalf.
Check out my blog post, about how to get started with investments.
https://moneyminted.co.uk/the-world-of-investing-should-be-simple-and-easy
If you’re going to invest or save then use the tax free wrappers available such as ISA / stocks & shares ISA.
So any gains, profits,, growth and dividends received remain tax-free and don’t have to be declared to HMRC.
10. get your finances in order
Try and simplify the number of accounts or products that you hold.
By all means, it pays to shop around. But can you manage several accounts across numerous different providers. All with different log-in details, access codes and 2-factor authentication.
You should have ideally the following:
1 current bank account
1 emergency fund account
1 saving account – preferably cash ISA
1 stocks & shares ISA
1 workplace pension
Plus possibly mortgage and life insurance policy to cover that mortgage.
So make a decision to simply your numerous accounts and review them on a regular basis.
The UK savings protection limit is £120,000 per eligible person, per UK-authorised financial institution
If you have numerous workplace pensions, do you simplify and consolidate them.
See my blog post on consolidating or transferring a pension: https://moneyminted.co.uk/how-to-consolidate-your-pensions
If you have a private or workplace pension. Have you completed your nomination or beneficiary forms.
Your pensions won’t disappear with you or go to the tax man / HMRC or pension provider. They can be passed onto your family. But the pension provider won’t spend weeks or months trying to find them.
It’s a simple form that can be completed in paper form or via online pension portal account.
Or if you have any missing pensions, track them down through the free service offered by the Pension Tracing via the link:
https://www.gov.uk/find-pension-contact-details
Have you managed to set up a Will or a Power of Authority. So someone can look after your finances in worse case scenario.
How about creating a simple folder or spreadsheet itemising all the accounts that you and your partner hold.
Hopefully the above action points have highlighted some key considerations.
That you may wish to take action upon to improve your finances in the next year.
Once you have taken action, and implemented. It should be easy and simple to review in later years.
Remember:
If you found this blog post useful and informative. Feel free to check out my other blog posts on savings, investing, pensions and investment books I recommend on https://moneyminted.co.uk
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