10 commandments of managing money

As we look ahead to 2017, a lot of people will be thinking about what they want to accomplish over the next 12 months. If previous years are anything to go by then losing weight, stopping smoking and getting the finances in order will be at the top of many resolution lists.

We can’t help you stop smoking or lose weight, but we know a thing or two about money.

The problem with resolutions is they often aren’t specific, so failure is common. If you say ‘I want to lose weight’ or ‘I want to get a better grip of my finances’, you haven’t given yourself a timeframe or even said what the end goal is.

Without more specifics, like what you will change, how will the next 12 months be any different to the last 12 months?

To help you on your journey, this article has actionable steps you can follow to improve your financial situation. You won’t become a millionaire overnight, but you could be much more comfortable and able to deal with unexpected bumps.

Lower mortgage rates Don’t waste it 

This is arguably the most important rule, because the more you keep the more you have overall. There are obvious wins here, like not buying things you don’t need, but you could also check to see if you are overpaying for essentials. Could you get a lower mortgage rate or a better deal on your broadband, for example?

Tackling debtTackle debts

Interest payments are a huge drain on your money, so getting rid of them should be a priority. Two efficient and popular ways are to either hit the one with the highest interest rate first, and work down from there, or to clear the smallest debt first, then the next smallest and so on. Once you clear one, use the money you were spending on repayments to clear the next debt faster.

Value over costConsider value over cost

There’s no escaping the fact that cost is important, particularly if you simply can’t afford something. But it shouldn’t be your only consideration. Instead, think about something’s value. It’s better to buy something for £30 once and have it last a long time than buy the £10 alternative four times because it breaks after a short while.

Investing in stock market, bonds and propertyInvesting isn’t the same as spending*

When you spend money, you probably won’t see it again. When you invest, you have the intention of getting more down the line. That could be putting money into things like the stock market, bonds and property, or into yourself through education and experiences to increase your earning power.

Attitude towards money Make the most of what you have

If you earn £7 an hour and buy something for £20, you’ll have to work another three hours to get that money back. Is the purchase worth it? Measuring things in time can be a very powerful way of changing your attitude towards money.

Tax free pension money Take free money when it’s on offer**

It’s often said that there’s no such thing as a free lunch. That may be true, but there are times when you’ll be offered extra money. Pensions, for example, offer tax relief so your contributions are bumped up. And if you have a workplace scheme, your employer might pay in as well. All that extra money can make a huge difference over the years.

Controlling finances Give yourself some slack

Getting a better handle on your finances doesn’t mean you have to stop all but the most essential spending. It’s important to leave yourself with money to enjoy as well – which leads us nicely onto the next point…

Dividing and controlling your money Split it up

Separating your money will make it easier than ever to manage. If you keep your money for bills in one account, savings in another and spending in a third, you’ll always know exactly what you have. This also allows you to allocate a certain amount to each account when you get paid, so it’s easy to see what you’re spending as the month goes on.

Check direct debit Know what you’re spending

It’s easy to overlook where money is going, especially with small payments and direct debits that have been forgotten about. Check for any direct debits and standing orders on your accounts and cancel any that you no longer want.

Setting a saving target Know what you’re saving

Instead of hoping to save whatever’s left at the end of the month, set a savings target, whether it’s a percentage of your pay or a fixed sum. If you can’t find the room in your budget to save, follow the 1% rule: save 1% of your take-home pay in the first month, and save 1% more every month. So if your monthly earnings are £1,200, you’d save £12 to begin with and another £12 every month after. It’s usually a small enough amount that you can find it, and after a year you’ll be saving a very impressive 12% of your income.

Do you have other tips you’d like to share? Tell us in the comments below.

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Important information

*Investments can fluctuate up and down and you may not get back what you put in.

**Tax relief is dependant of individual circumstances and may be subject to change.

The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new

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