Our second guest blog is in response to our Instagram poll which revealed that 91% of TTC followers feel they need to get their finances in order! So we’ve asked an expert to set out the first 7 key steps to sorting your finances…
Claire Sweet is an award-winning Financial Adviser and Money Coach. She has a thriving business and is regularly asked to speak on BBC Radio Kent as an expert in her field. She has been featured in a range of publications including The Telegraph, Moneywise and Sheerluxe.
Claire and her husband Phil recently moved to their ‘forever house’ on a 4.5 acre plot. They love spending their time outside with their small herd of alpacas (so cute!).
The first 7 key steps to sorting your finances
Money can cause stress for so many people, especially when you are self-employed or the sole wage earner. Even if you’re earning good money, you can often find that it just doesn’t seem to be in the right place at the right time. And this can make it hard to live your best life.
I passionately believe that happiness is something that should be happening in the present, not at some far off point in the future. So if you can get your money to work for you, then you’re best placed to fill your life with experiences that matter.
Here are suggested first 7 key steps to sorting your finances. Hopefully these will help you get the best out of the money that you have…
1. Know your numbers
It’s crucial that you know how much money you have coming in each month, and how much going out. I’m not saying that you need to write down everything that you spend (although some people like to)! But taking a look at your spending every 3-6 months will help you check that you’re not spending more than you earn.
Using a budget planner can help. Include all the things that you pay for annually (holidays, Christmas presents, Car insurance) by taking the annual payment and dividing by 12.
Make sure that there is more money coming in than going out each month. Also check that you’re not paying for subscriptions that you no longer use. If you’d like a budget planner that will add up the numbers for you, you can get one here.
2. Have some money for Fun Stuff
Every month when you get paid, transfer a percentage of your money into a separate account that you can use for ‘Fun Stuff’. Life is for living. It can be easy to fall into the trap of using every penny to pay for bills and groceries and find that at the end of the month there’s not a lot left for anything else.
By transferring the money first, you are prioritising your happiness and ensuring that you have money to spend on your quality of life.
Meals out, cinema trips, a spa break or buying new books – you’ll always have some money to spend on you, without feeling guilty or worrying about paying your bills.
3. Save for the important things
If you’re looking to go on a dream holiday, or replace your car, you’ll need to come up with a lump of money. Especially if you want to avoid having to put it on credit, which will cost you more in the long run.
You know how as an employee you’re on Pay as You Earn Tax (PAYE)? Put simply, your tax is taken out of your pay before you get a chance to spend the money. You can use the same principle for anything else that you want to prioritise saving for. All you need to do is transfer the money out of your account at payday. If you wait until the end of the month, you may have spent the money on something else.
Your day to day spending will naturally adjust so that you only spend what’s left. Trying to save the money at the end of the month rarely works. But by paying yourself first you’ll have enough money to go on holiday every year – no matter what you earn!
4. Think about what happens if you can’t work
All the best laid plans can fall apart if your income stops due to accident or illness. Now it is possible to set up an Income Protection Policy (Private Sick Pay). This covers the gap between any savings you have and the sick pay paid by your employer.
Protection will stop you needing to dip into your dream fund because you’re too ill to work. But, not all plans are equal, so read the terms and conditions carefully. Or seek advice from a qualified Financial Adviser.
5. Someday you’ll want to work less hard!
Retirement doesn’t need to mean hanging up your boots and pottering in the garden. These days many people choose to work part-time, or still draw an income from their business long into their later years.
But you should still consider how you are going to fund the gap between your State Pension and any savings you have. Investing into a Pension is one thing to consider. You get FREE money added to your pot every month in the way of tax relief. And the earlier you start, the longer your money has to grow. You may also consider rental property and other investments. Whether these are right for you will depend on how much money you will need and when. Ask a qualified Financial Adviser to run the numbers for you!
6. Take responsibility and educate yourself about money
There is an array of information available about how to manage your money, from the latest best-selling book, to information available online. But make sure you take time to check out the credentials of the author.
Many books and guides are written by people without any formal Financial Advice or Accountancy qualifications. They may not, therefore, represent an accurate picture and could contain outdated (or unethical) practices.
7. Keep on top of it!
Review your money position at least annually to see if you’re moving towards your goals.
Have you repaid the debts you planned to? How much is left on your mortgage?
Are your pensions and investments on track? The value of investments varies over the short term (month-to month) but over the longer term (5y+) should be moving in an upward direction.
By keeping on top of your finances you’re best placed to get out there and enjoy life, whilst building your nest egg for the future.