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It means having the knowledge and confidence to make the most of your money – on a daily basis and through planned and unplanned events.
Easier said than done, but here are 9 good money habits to put you on the right path.
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Like a balanced diet for your physical health, a budget can be the first step to better financial health. It helps you take control and decide where you need and want to spend. A budget should include essentials, like your rent or mortgage payments, utility bills, transport, and hopefully some things you enjoy. Our budget planner can help you see how you spend your money and where you can make changes.
The important part is to set aside time to forecast your spending often – each time you get paid, for example. There are plenty of apps that can help you do this.
Creating a budget is relatively easy, but sticking to one can be harder – monitoring your expenses is vital.
Again, you can use apps to help. For example, our mobile app has a feature called Balance After Bills that shows how much you could have left once your regular bills and payments have come out of your account.
Being mindful of how and when you spend your money can help you stay in control. You might also spot areas where you could cut back.
No matter how big or small your budget is, not overspending is an important habit to get into. This is about knowing your limits and using your money wisely, so you don’t end up feeling guilty.
It means focusing your spending on essentials and things you really get pleasure or value from. For example, you can spend money on clothes or going out with friends if those are things you enjoy but include them in your budget so you won’t regret it later.
Explore: How to make good financial decisions
Borrowing money is not necessarily a bad thing. When used appropriately, debt can help you improve your finances.
For example, borrowing money to buy a house can help you become better off in the future, as the house may increase in value. So long as you can afford to keep up with the repayments.
That said, you should avoid borrowing more than you need to. You should avoid borrowing money for day-to-day essentials like food or bills, as this may lead to bigger problems - especially if you’re using short-term credit or overdrafts with high interest rates.
If you’re worried about money or have debts you’re struggling to repay, you can get confidential help.
If budgeting is the balanced diet of your finances, saving could be the exercise.
And, like exercise, little and often is a great way to start. You could set a goal to save towards or aim to save a little extra each month to cover any yearly costs you have.
You could set aside money every time you get paid or use an app to round up your spending and put loose change into a savings account. The key is to make it a habit. Having goals and saving towards tangible things is a great way to stay motivated.
Explore: How to save money
While you don’t want to be overthinking or second-guessing every purchase you make, it’s well worth doing your research when it matters.
You can save money by shopping around. One idea is to review all your Direct Debits once a year and look around for better deals.
Online comparison sites can be a good place to start. But look for quality – both in the product and service – to ensure you get value for money, not just the cheapest price.
Shop around and wait for deals on one-off purchases. Consider when certain products or services, such as flights, might be cheapest. For example, do your research into whether it's cheaper to fly on certain days, and how long in advance you should book to get the best price.
Choosing financial products can be hard, given the volume and complexity of options. But, again, it’s worth shopping around to make sure you find the right products for you.
If you’re looking for a savings account, for example, the interest rate will of course be important. But it can pay to look beyond headline incentives to ensure a product will suit you. A savings account may have conditions on how much and when you can contribute, as well as restrictions on withdrawing the money. Don’t forget to factor them in.
You’ll also want to consider the reputation of the provider and the quality of experience and service on offer.
Take the time to fully understand products, including the terms and conditions. For example, when buying insurance, this might mean checking exactly what is and isn’t covered, rather than choosing based on price alone.
It’s good to get into the habit of reviewing all your products and looking around for better deals.
Most of us experience the shock of an unexpected bill every once in a while. It could be something you didn’t see coming, like a problem with your house that isn’t covered by insurance. Or it could be something you forgot to account for, like renewing your car insurance.
It pays to expect the unexpected. The best way to start is to build an emergency fund – ideally 3 to 6 months' worth of living expenses. This way, if something does happen, you’ll have savings to fall back on.
Our emergency fund calculator can help you see how long it would take to build an emergency fund. You could use this to create a timeline to work towards.
We all have different ideas about what the future might look like.
Whether you dream of taking a career break, setting up your own business, or giving up work altogether, the more money you build up, the more flexibility you’ll have to do what you want.
Start putting money aside as soon as possible. Whether you keep this money in a savings account or invest it will depend on your circumstances. This would include whether you have an emergency fund, the size of your goal, when you need the funds, and your attitude to risk.
There are plenty of ways to prepare for life after work. If you can, make the most of a workplace pension. Your employer may even offer matching contributions, which means extra money towards your retirement.
The sooner you start, the better – even small amounts make a big difference over time. So set aside what you can and try to increase your contributions over time.
Use our retirement calculator to work out how much you need to save to retire when you want, with the money you want.
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