This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxford).
You have your monthly spending and bills. Birthday and Christmas gifts. One-off, unexpected costs (e.g. a broken boiler). Pension contributions. Holidays. Rare, big purchases like a new car. Savings and investments. The list goes on. Money management is difficult, to say the least. Yet doing it well is certainly possible. Here at WMM, in light of the financial hardships many people have experienced with COVID-19, we wanted to offer this 2021 guide below.
Bill & contract management
Many bills are due at the start/end of each month. Yet others fall in between, and it is easy to lose track of everything. Things get even more complicated when longer-term contracts are put in the mix, such as a 2-year phone bill or a 12-month Disney+ subscription. Consider putting a reminder in your wall/smartphone calendar for each one, so you are not caught out.
Plan for big outlays
Sometimes systematic overspending puts people into debt. Other times, it is a large one-off cost that hasn’t been planned for. You can help prevent this by anticipating the expense and saving up for it. Take a new car, for example. If you assume that yours will last 11 years (the typical age of cars on the road), then you can set aside the thousands you need later for a new purchase by saving a bit each month now. You could even set up a dedicated account on your online banking to store this money over the years, so you are not tempted to use it for shorter-term expenses.
Spend more now, and less later
Many of us hear that, to save more, we should spend less. This can certainly be necessary at times. Yet you can also often save more in the long term by buying something higher-quality (therefore more expensive), and running it into the ground. A car, again, is a great example. You could spend £1,000 on an old car with very high mileage to try and save money in the short term. Yet you are likely to need to pay for expensive repairs in the years following, with a high chance that you will need to buy another car soon. However, saving up and buying a more reliable vehicle with less mileage is likely to last much longer, and experience fewer problems.
Use cash and monitor accounts
How regularly do you look at your online banking statement? Many people go weeks without checking, during which time an unpaid credit card bill can strike. Consider, instead, making a habit of reviewing it once per day (e.g. over breakfast). Also, think about using more cash to control your spending. During COVID-19, more of us have been paying for things online, and it is easy to lose track of this. Having a set amount per day/week in your wallet, however, forces you to be more accountable with yourself.
Avoid debt and overdrafts
Annual percentage rates (APR) on credit cards have become more punitive in recent years, going over 20% in many cases. For a £1,000 balance, that’s a £200 interest charge if left unpaid. Banks are also now often harsher on those in their overdrafts, with some charging as high as 35%. These kinds of charges can add up significantly, eroding your disposable income and ability to save. If it is possible, therefore, consider making it a priority to eradicate personal debts – even if it means cutting back temporarily on some luxury spending. Think about focusing on the smaller debts first and gradually moving to the largest.
Interested in finding out how we can optimise your financial plan? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469