We get it, financial planning isn’t exactly an exciting conversation topic. ‘Effective household budgeting’ may not be a phrase you expect to hear during an evening with friends or family.
Yet even so, managing your money responsibly is important, helping you avoid the risk of overspending in the good times while also making it as easy and painless as possible to tighten your belt when needs be, too.
Here are five top tips for planning your finances responsibly – whatever your budget and whatever you like to talk about in your spare time.
Make a list of your essential outgoings, like rent/mortgage, groceries and travel costs, as well as any debt payments or savings contributions. Then subtract them from your monthly income. That way, you’ll know how much you can afford to spend on the fun stuff. By building your budget and actively keeping track of it – whether that’s by writing it down, using a money management app or even keeping separate pots in your bank account - you’re more likely to stick to it.
Tempting as a wardrobe overhaul, new mobile device or cool set of wine glasses can be, always ask yourself if you can realistically afford what you’re thinking about buying. Of course, there’s nothing wrong with treating yourself on occasion, so one tactic is to plan those treats throughout the year. That way you’ll feel like you’re enjoying your money while reducing the risk of spending more than you meant to in a single splurge.
Buy Now Pay Later schemes are a great way to split the cost of items into more manageable chunks. But paying later doesn’t mean paying never. Plus if you’re not careful, it’s easy to stack up multiple Buy Now Pay later plans, which can leave a hefty dent in your monthly income. So, make sure you know how much you will ultimately need to shell out and plan ahead to cover it when the time comes.
As COVID-19 has reminded us, the world is an unpredictable place. Try to put aside a small amount of money each month to build an emergency fund. If your circumstances change and you suddenly find yourself without an income, you ideally want enough saved to cover your living expenses and service any debts for six months.
Being smart with your money isn’t only about how you spend it, it’s also about where. When shopping online, stick to reputable vendors and check for the padlock symbol in the address bar, which shows the site is secure. When you check out, confirm what currency you’re paying in so you’re not surprised by bad exchange rates or high conversion fees and look for the logo of a trustworthy payment platform.
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