Knowing exactly what the future holds is of course impossible, but that doesn’t mean that you shouldn’t have a solid plan laid out for your finances for at least a few years ahead. Circumstances will undoubtedly change, but your plan can change along with it; it’s all about knowing what direction you’re heading in, and setting yourself up to be in the best possible financial situation in the future. With this in mind, there are three main things you can think about right now that will help make sure that you control your money, not the other way round.
Eliminating Debt
Debt eats into the money you have available each and every month. While there’s little you can do to quickly eliminate large commitments such as your mortgage, those smaller instances of credit are the ones that should be top on the list of priorities for anyone who wants to have more of a say in where their money goes. Try to pay off more than you’ve agreed to each month, assuming you’re allowed to, in order to shorten the lifespan of any loans you have, and make them cheaper. Simple things like rounding up your minimum payment each month can really make a difference.
Stock Up on Savings
One of the most commonly given pieces of financial advice is to have a reasonable quantity of savings. This is quite simply because of the point we explained earlier – you never know exactly what might happen in the future. Your job might be secure right now, but if you were made redundant, could you afford to live until you found something new? Most people aim to have between three and six months of living expenses tucked away, and there’s no harm in doing the same. One important point to remember is that it’s not often a good idea to be saving too much money while you still have debts. The longer you hold debt, the more expensive it is, so use the majority of excess money to pay it off.
Plan for Retirement
As young as you might be, the truth is that it is never too early to start thinking about your pension, and if you’re employed, you should be paying in right away. In countries like the UK, where there is a state pension, it can be tempting for people to rely on it, but it is far better to have saved your whole life, especially as people are living longer than ever. Those who want lots of control over their money in later life might benefit from looking at what’s known as a SIPPS, or self-invested personal pension. First provided by James Hay, it allows people to actually make their own investment decisions. Not ideal for everyone, but excellent for those who are savvy with personal finances.
Plan for later life, spend within your means, and keep some cash in reserve and you can be confident that you’ll have control over your finances.