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If you, like many people, are formulating some financial plans for 2021, this blog is a good place to start. As any food nutritionist will tell you, different people require different diets in order to meet their goals. The same rule applies to money management. However, as with food nutrition best practice, there are certain rules which everyone should strive for, including drinking sufficient amounts of water, regular fruit and veg consumption & careful management of how much sugar we eat. This blog sets out to outline 8 key points, which contribute to good long term financial health.
It’s a new year, so it’s time to look through the books. Most people have a collection of ongoing services that they pay for including phone bills, TV streaming subscriptions, gym memberships and so on. Have a delve into your bank statement, you may find a subscription you’re still paying for, that you’ve forgotten about.
Once you’ve made a list of all of your bills, it’s a good idea to ask yourself the following questions ‘am I using this subscription enough to warrant the expenditure’ & ‘can I get a better deal with the provider by threatening to leave, or by taking my business elsewhere’.
By taking the time to organise your fixed bills, you will often find ways to save money which can be redirected into other areas.
How would an emergency affect you? For example a dental bill, a broken down vehicle or redundancy. Good financial planning includes an emergency fund which is in place for emergencies. Prior to investing money into a savings plan or property, it’s a good idea to build an emergency fund which is put aside for life’s inevitable emergencies. Without taking this step at the start of your financial planning, you may find yourself taking one step forward and two steps backwards when an emergency strikes.
After you’ve built an emergency fund, via saving a portion of your income. It’s good practice to continue this trend by saving a portion of your income into a savings vehicle. But saving money is only half of the challenge. Once you’ve saved a portion of your salary, you need to get it to work for you.
One common mistake people make is saving money and keeping it in their debit account, or keeping it in an easily accessible separate bank account. Moving your savings into different assets, for example, equities or mutual funds not only makes them less accessible but also provides you with the ability to earn a return on your savings.
One of the biggest hindrances to people achieving financial success is poor debt management. Debt, like fire, can be used for good for example mortgaging, but once a fire gets out of control it can be destructive, the same rule applies for debt.
Debt comes in many forms including loans, credit cards, mortgages and so on. If you mismanage your debt, it can become expensive. With that in mind, prioritise the clearing of debt before saving or investing money. Ensure you clear any expensive liabilities before you look to build wealth elsewhere, as you may be cancelling the other out.
Last on the list of your January to-do list should be to explore whether you have a potential insurance issue. Below is a link to a downloadable PDF which outlines the basics around if you require insurance.