One of the biggest challenges facing individuals today is how to make sure they are doing enough with their finances to secure their financial future whilst being properly equipped to handle financial shocks that may happen at any time in the present. This piece takes a look at practical steps you can take.
If you are often quick to spend all or most of the income in any given month without proper planning, you will always find perfect justification to continue in the habit. Unfortunately, this habit is one that leaves you very vulnerable to the negative effects of financial shocks that could happen at any time. Can you get by for three months without your job on your current spending habit? Can you see off an unexpected bill of £5,000 without borrowing? If you answered no on both questions, you need to learn how to budget your income effectively.
Credit cards are part and parcel of everyday life for most people. When properly used, they could be some of the best financial tools available to you. When used wrongly, they could jeopardise your financial future indefinitely. Correct use of credit cards includes tackling of important financial challenges not covered by your budget. Wrong use of credit cards includes impulsive spending on items or situations that add little to no value to your financial sustainability. Some credit cards offer lower rates than ever today, but it’s always good to shop around. It is still not enough reason to go overboard with them as interest rates can mount fairly quickly.
Many people have one form of insurance or the other. The key is ensuring that the insurance policies provide adequate cover. A home insurance policy that doesn’t cover properties isn’t comprehensive as you will be left to deal with the cost of items following a burglary case. The situation is the same for a business insurance policy that doesn’t provide cover against work related injuries. To avoid unexpected shocks as a result of being left in the cold by your insurer, it is important to go over you insurance policies effectively.
Regardless of how effective your financial management is, your financial future will remain dicey if you don’t have a proper pension plan in place. Having funds in an ISA is not enough. Pension policies are managed properly by providers to grow all amounts invested by you. A pension pot started at the age of 30 in preparation for retirement at the age of 65 will yield more returns than an ISA held for the same period of time. The disparity will be even more pronounced if your employers have a policy that matches all your deposits in a pension pot.