Winning with your money
Ok so money management, where do we start? Good old fashioned budgeting. Sound boring? Maybe, but if you want to get a handle on your money (and help it grow) you need to know what’s coming in and what’s going out. There’s lots of ways to budget; pen and paper, spreadsheets, budget calculators. What matters is that you sit down and you actually do it.
How to budget
First, take a look at how much money is coming in from your salary or any other income you have. Next, you will need to get an idea of how much money goes out on a monthly basis. So make a list of all your monthly outgoings. Let’s start with fixed outgoings like your rent or mortgage, council tax and tv licence. Now take a look at your gas, electricity and broadband. Finally, add to this groceries, car fuel or travel fare. This amount can vary a little depending on how extravagant you feel each month.
Savings alert! Now here comes the interesting bit. You should try to switch your energy supplier on a yearly basis, this could save you, on average, between £200 and £300 each year! Use MoneySupermarket to find a better deal on your gas and electricity. It’s user friendly and easy to calculate your new bill if you were to switch.
As far as broadband deals go Sky or BT are, in our opinion, the best. Especially with BT’s promise to keep you connected if your broadband goes down. Although they’re not necessarily the cheapest, you’re likely to spend a lot less time on the phone complaining to customer services.
Save, Invest and spend
I don’t like the term “disposable income,” as it implies that you can just throw your money away. The smarter thing to do, is to first save a portion, then invest some to grow your money and whatever is left over you can spend.
Set out some goals you want to save for, like a holiday or a deposit for a house or even just to clear down some debt. By putting some money away regularly you can achieve them. You can do this by using the jam jar method. Divide your monthly income into different ‘money’ jars, one for each of your goals, and start saving towards them every month. This will make sure you don’t just spend that money elsewhere and that you actually have something to show for the 40 hour work weeks you put in all year round. Some banks allow you to jam jar your savings, such as Monzo.
Savings alert! It’s always good to have a regular saver for your monthly savings. You can also use a current account as a saver, like Nationwide, which is one of our favourites. They give you £100 to switch and then pay 5% interest on the first £2,500 of your balance, which when you look around the market is pretty decent. You could also go for an account with First Direct. They give you £50 for switching. With it you can open a regular saver that lets you save £300 per month and pays you 5% interest.
Handy tip! It can be useful to have two current accounts, one that all your salary goes into and your bills come out of, and another to which you send the money you’re giving yourself to spend for the month.
Investing your money
Investing sounds scary if you’ve never done it before or if you’ve ever stumbled across Bloomberg, which is probably enough to frighten off any novice investor. But the good news is there’s a range of investments that could suit your risk appetite and financial goals.
Investment tip! If you take a look at Fidelity you can start to invest as little as £50 a month. But you should ask yourself what you want from your investments? Do you want to invest to build up passive income? Or do you want your investments to gain in value so you can sell them at a later date.
Either way, you will probably need to get some independent financial advice and trust me even a little bit of advice can go a long way. A lot of advisors will give you an initial consultation for free – so use it!
Watch your spend
Then track this spend. You can use your bank’s app to watch your balance or there are lots of wonderful apps and fintechs set up to help you do this such as Meet Cleo which is a bot that sits in your messenger and answers your questions about your bank balance.
I’m all for challenger banks like Monese, especially if you travel a lot and need foreign currency. Or Starling Bank if you prefer mobile banking to traditional banking, so long as they help you manage your finances. But don’t be mistaken. These are just tools, the hard work is sticking to a plan, a financial plan.
Drop your costs
Try to drop the cost of things like car and home insurance by using a comparison website. With Compare the Market, you can knock hundreds of pounds off your renewal quote. Do you really need an expensive phone contract or could you go for a cheaper tariff? Networks like giffgaff offer great value or think about Smarty if you’re a data heavy user.
Handy tip! If you want to be really clever you can batch up all the big items you want to buy. Then use a credit card that gives you cash back to make the purchase. But make sure you clear the balance immediately to avoid paying any interest or fees. You can get some great cash back deals with American Express, offering 5% for 3 months. But that’s not a licence to spend recklessly! A credit card should not be used unless you have a clear pre-planned purchase in mind and you can clear the balance straight away.
Money is your future
Money management might be boring but once you start you will realise how empowering it is. Being in control of your money and making it work for you will allow you to take control of your future. Just keep it simple and realistic. Giving yourself nothing to spend will leave you demotivated. If you can even do a rough budget and set some goals you’ll improve over time and as you see results you’ll want to do more of it.
Wealth building is a long term game and so it needs a long term perspective. That’s what rich people do and by rich I’m not talking about the billionaires of the world. I’m talking about the person with the freedom to live the kind of life they want.