Planning for the future: How to manage your money
The Mix would like to thank MyBnk for their help and expertise in producing this article. Click here, or below, to take our e-learning course, built in collaboration with MyBnk.
How can you plan for your future?
In a 2019, a BBC article on wealth in the UK suggested that those in their 80’s were estimated to acquire around £186,000 and those in their 30s around £55,000, but those in their 20s were at just £2,000!
Those in their 60s were deemed to be the wealthiest age group with an estimated amount of £332,000 or more – this was owing to an accumulation of pensions, savings and property.
Now, no one can predict what the future holds, but the article does raise some important questions:
- What could you being doing now, to better prepare for the future?
- Which decisions could you be taking now, that would create more security for when you’re older?
Here’s an expert guide from financial charity, MyBnk, on what you could do now to prepare for later.
Enrol in your workplace pension scheme
From the age of 22, if you’re in employment and earn at least £10,000 a year you’ll automatically be placed into a workplace pension scheme.
This scheme enables you to put aside money for the future from your current salary, but also receive contributions from your employer and the government in the form of tax relief.
Start to build savings
If there are any lessons to take away from the recent pandemic, it’s to ensure we build savings for those critical ‘rainy’ days, weeks or months. Having savings put aside to last you three months or more, puts in you in a strong position to handle any eventuality.
ISA’s (Individual Savings Account) are great saving schemes to save money, but not be taxed on the interest added. These schemes allow you to deposit a total of £20,000 in one year. Use the Money Saving Expert website to find some great deals.
That rainy day could be an issue with your car, a family emergency or even an unexpected downsizing in your company. Review your budget and see what disposable income is available to put aside, you’ll never know when you need it most.
Sign up for life insurance
If you happen to have a child or partner who depends on you financially, then life insurance may be a good idea to sign up to. You agree to pay a monthly amount towards your insurance policy, and in the event of you passing away, being diagnosed with a long term illness or being out of work for a period of time, the insurance will pay out an agreed amount to cover your financial absence.
Of course, there is the likelihood of nothing happening and you grow on to live to a ripe old age, but if you do have people who rely on you, having life insurance in place covers you for any future eventuality.
Keep an eye on your budget
Typically the habits you build in your youth will follow you into adulthood and beyond. Start to practice the habit of monitoring your income and spendings by making a note of which purchases are a need and which are simply a want. Read this article to get some tips on being financially savvy.
In the future, when managing your own household, this skill will be so useful as you navigate new household expenses alongside your personal ones.
There are a range of free apps and great online tools that can help with this process, but find what works for you and stay committed to it.
Map your credit route
Contrary to popular belief, credit can be a great tool to build a foundation for your financial landscape however it takes wisdom, discipline and steady planning.
Take time to look at the next 5-8 years of your life, and plot the different places where you may need the help of credit to get to the next stage. This may be different for each person, but typically things like buying a house or starting a business will need a loan, so you can prepare yourself beforehand by building up your credit score and credit report.
Things you could do:
- Use your first credit card to make small, regular purchases which you pay back in FULL each month.
- Register your name on the local voting register.
- Register your name in your monthly utility bills, online subscriptions or mobile phone contract.
Preparing financially for the future can be a daunting task especially as there’s no way to prepare for the unknown, however putting things in place now will always help you prepare for whatever eventuality.
How will the pandemic affect all of this?
The first thing to say is that most of the above still applies! Workplace pensions may offer the chance to freeze payments if you need it but this will decrease your final pension amount.
The other note is that savings might be better used to survive this situation if you have lost income – rainy day savings are for these type of situations so don’t feel bad if you need to dip into your savings to get by – you can have a plan for saving again once your income stabilises.
Remember that this situation may go on for some time so be prepared to ration your cash more closely than usual. While you may save money immediately on things like travel and eating out, you might find yourself more likely to boredom buy online or buy more takeaways.
If you are usually out and about during the day, you’re probably using more electric and gas than usual so be prepared for slightly higher bills this year.
As always, if you are having problems with your situation, talk to someone – a professional, the company you owe money to, a family member – and don’t do it alone. Good planning now can help ease the future stresses we might all face, but no one would blame you if you need to switch to survival mode for the time being.
I’m feeling anxious about money
If you’re feeling worried about your finances, that’s ok and we’re here to help. Money can be a really stressful issue to navigate, especially while everything is so uncertain. But our support team are here to listen, offer reassurance and connect you to the right advice. Head here to speak to our team of experts and trained volunteers.
Additionally, you can find more information and tips on managing your finances on our money hub here.
- The Money Advice Service offers free, unbiased and independent advice about all financial matters. 0800 138 7777
- Citizens Advice offer free help with housing, money and legal problems. Find your local centre.
- Chat about this subject on our Discussion Boards.
- Need help but confused where to go locally? Download our StepFinder iPhone app to find local support services quickly.
Updated on 27-Aug-2020
Sorry, comments closed
No featured article