Whether you’re keen to boost your credit score, increase your savings pot or save for retirement, it’s important to manage your finances well.
That’s why we’ve put together four top tips for improving your financial health, with easy strategies to help you master your money.
Create a budget and stick to it
To be financially healthy, consistent budgeting is key. It’s essential to be aware of your spending habits and where your money goes each month.
The first step to creating a realistic budget is establishing your monthly income after tax and other deductions like your pension.
Once you know your take-home pay, look at the fixed outgoings for your household. This includes things like your rent/mortgage, car payments, council tax, utility bills, insurance and so on.
Once you’ve added up your necessities, take this amount off your take-home pay to see what you’re left with each month. This gives you the total amount you have to save or spend.
From here, look at your discretionary spending. This is what you typically spend on eating out, entertainment or hobbies. Then, you can start creating a budget for each area of your life.
Build an emergency fund
Experian explains that an “emergency fund is savings for a future financial crisis or unplanned expense”.
This could be costly car repairs, a boiler breakdown or job loss that comes out of the blue. An emergency fund is there to give you the financial resources you need to handle a crisis without borrowing money.
They say that “the size of your emergency fund may depend on your income and expenses” but typically should “cover three to six months of living expenses”.
It’s wise to keep the money separate from your regular bank account to avoid dipping into it.
Pay down debt strategically
There are several ways you can clear debts to achieve more financial stability.
Remember that it’s important to prioritise your debt, with “priority debts” being things like your mortgage or rent, utility bills or council tax.
If you have unsecured debts such as overdrafts, credit cards or personal loans, then you may benefit from creating a budget to tackle it.
Another option is debt consolidation. This typically involves taking out a new loan which pays off your debts and moves what you owe into one place, which can be more manageable.
Regularly review your goals
As you move through life, your financial needs will change. This is why it’s so important to regularly review your goals, making sure they still align with your household income and lifestyle.
For instance, if you start a family, you may develop a new financial goal that involves saving money to fund the kids’ hobbies. Or, if you change jobs and your income goes up or down, your monthly budget will need to be adjusted.
Your goals may also shift if you have a tricky period and develop debt or poor credit. You may want to focus on making regular repayments on time, paying off high-interest debs or taking out forms of credit that could help improve your credit score.
By assessing your needs regularly, you can effectively manage your goals and boost your overall financial well-being.
There are many strategies for improving your financial health. Seek professional advice before making any important decisions regarding your money.
