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Money management: How to make the most of your money

Are you living within your means and planning for your future? Or are you drowning in debt and in denial about your financial situation? Beyond paying off your debts and saving, there are ways to build healthy habits to improve your financial wellbeing. Here are some money management tips to help you get started.

How to live within your means

A good way to establish if you're living within your means is to keep a daily record of where your money goes during a typical month.

Here's what you may consider:

  • Make a note of everything you spend each day, over a month.

    Include everything, from your daily commute to the snack for the journey home and regular payments like your rent and utility bills.

  • Subtract your total expenses from your take home pay at the end of the month.

    If your monthly expenses come to less than your take home pay, then you're living within your means.

  • Take time to reflect.

    If you aren't living within your means, don't worry. There are plenty of things you can do to take control of your spending. Start by using the record of your spending to identify which expenses, if any, could be reduced or avoided.

How to seek help with your debt

There are times when our finances may not be as 'healthy' as we'd want them to be, or we find ourselves in financial difficulty. It's easy to feel overwhelmed and ignore what's going on. But this won't make the situation any better. Talking to a debt advisor could really help your financial health.

If you find yourself in a position where you aren't sure what to do, seek advice from a free debt advice charity straight away. There are also options available to you from a lending perspective to help with this period, and borrowing may even help with that all important credit score.

How will a debt advisor help you?

A debt advisor will:

  • Never judge you or make you feel bad about your situation

  • Find ways to manage your debts even if you think you have no spare money

  • Suggest ways to deal with debts that you might not know about

Free debt advice can be given in many forms: telephone, online and face to face. There are also multiple ways to pay off debt, and it's important to think about your own personal situation. What will suit you, and support you best to clear off your debt? You can read more in the article 'How to build up your credit history'.

If you're struggling to pay off your debts, we're here to support you. Our specialists can work out a tailored repayment plan that meets your needs. Learn more

How to build emergency savings

An important part of financial wellbeing and money management is setting cash aside for unforeseen expenses, such as losing your job or emergency repairs. Here are 5 tips for building an emergency savings fund:

  • Set savings goals. This helps you to track your progress and measure your success. Plan to build up enough savings to cover at least 3 months of essential expenses, in case of emergency. Anything else that you want to save for (like a holiday) should be on top of this.

  • Discuss your savings goals with your loved ones. Explain what they're for and why they're important. Sharing a savings goal with those around you can help you to stay on track.

  • Keep your emergency funds separate from the money you use for everyday spending, or to pay your bills. Research shows that doing this may stop you spending it1. Setting up a separate savings account can usually be done quickly online.

  • Try to save regularly and automatically. Rather than saving what you have left at the end of the month, set up an automated transfer from your regular bank account to a savings account on the day you are paid.

  • Remember, saving any amount (however small) is helpful, and can build up a valuable emergency savings fund over time.

1.The Role of Mental Accounting in Household Spending and Investing Decisions, Client Psychology, 2018.

How to plan for the future

We are living longer than we used to, thanks to improved standards of living and better healthcare. Many people are enjoying longer retirements than they planned for, but that can come with the prospect of not being able to make ends meet later in life.

So the sooner you start saving for retirement, the more you'll be able to save, and the more comfortable you'll be.

How much might you need?

Everyone's situation is different, so there is no single rule to follow that will tell you exactly how much money you'll need for your retirement. It will depend on many factors, including:

  • The age you plan to retire

  • Whether you own your own home

  • The rate of inflation

  • Whether you have debts that you need to manage

  • Your family and number of dependents

  • Whether you plan to continue working, in any capacity, and semi-retire

A good starting point is to assume you will need between half and two-thirds of your salary, after tax is deducted, to maintain your current lifestyle.

When planning for your future, here are 3 key points to keep in mind:

  • Start as soon as you can. The earlier you start saving, the more the interest on your savings will compound, and the longer you will have to save.

  • Make the most of any tax-free savings and employer contributions you're entitled to.

  • Build your knowledge. You might want to seek advice from a professional financial advisor.

Find out more about how to build your wealth for the future.

Money and your mental health

Money worries can affect your wellbeing at any time in your life, whether or not you've started to work and are earning an income.

If any of the following behaviours seem familiar, it may indicate that financial concerns are affecting your health and wellbeing:

  • You spend money to make yourself feel better – on shopping or a night out with friends, even if it leaves you short of money later in the month.

  • You feel worried whenever you spend any money at all, even if it's on essential, everyday items.

  • You find getting to sleep hard because you are worrying about money.

  • You avoid opening emails from your bank because you're worried about what they might say.

If any of these sound familiar, the longer you leave them, the more they can affect your mental health.

Talking about your money worries isn't easy, but it may really help. If you don't feel able to talk with your partner about your financial difficulties, or how they are affecting your health, try talking to:

  • Your doctor or a medical practitioner

  • A trusted friend or family member

  • A support worker or other health professional

  • A charity that specialises in mental health issues

  • A tutor, or a counsellor in student services (if you're a student)

If a particular financial issue is affecting you, like a loan or payment that you can't pay, then talking about it with your bank or financial provider can be a good place to start. They may be able to help, for example by consolidating your debts, or extending the period of a loan.

If you're concerned that your mental health is impacting the way you manage your money, we have a range of services available to support you. Learn more