Many people fail to plan their finances in a way that ensures their financial security.
Follow these simple steps and you will start to take control of your finances and ensure your current financial situation is in good order:
Identify your goals
Think about those priorities that are most important to you and your family and start to plan for them. In the short term this could be a holiday, whereas in the long term it could be retirement planning. Establish the costs of your goals and apply timescales.
Work out your budget
Draw up a budget and make sure you stick to it. You should spend less than you earn, but if you don’t, then try to cut your costs or increase your income. To help you do this, we’ve got a handy budgeting tool.
Things to consider
Borrow only what you really need and before you do, understand the true cost of borrowing by checking interest rates and fees. Work out how you will pay your debt off as quickly as possible, paying off your high interest debts first
Insurance & protection
Make sure you and your family have the right amount of cover against illness, accident, death etc otherwise your finances could be seriously impacted.
Once you have paid off your high interest debts, start saving on a monthly basis for your shorter to medium-term goals, for example saving for a holiday, car, Christmas etc.
Use a savings account to build up a pot of cash to cover any emergencies, for example things like house and car repairs. This should be at least two to three months’ net income.
Make a financial plan for retirement. Do you have access to a workplace pension scheme? Even if you still have debt, seriously consider joining it, especially if your employer will make a contribution too.
Investments are not just for the rich. It opens up opportunities to make your money work harder for you over the long term. Investing a small amount of money regularly from a young age could leave you better off than investing a bigger amount in later life.
Investing for your children
All parents and grandparents want to provide the best for the younger members of their family, and rising house prices and university fees today mean that they may really benefit from a helping hand from you in the future.
If you want to consider a private education, help them out financially when they start university or move out, the earlier you start saving, the more you’ll be able to build up funds in the ‘Bank of Mum and Dad’. You could consider investing for the long term in a Junior Stocks and Shares ISA or a managed growth fund, which aims to increase your capital.
Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628.