Managing money is something that doesn’t come naturally to most people. Older generations may pass tidbits of information down to the next, but there’s no guarantee that they have the right money management skills either.

This means that many people end up getting well into adulthood without understanding the importance of saving, don’t know how to set a budget, and haven’t put money aside for retirement.

To put this into perspective, 22% of adults in the UK have less than £100 in savings. A further 15% don’t have any at all. This means that when an unexpected expense pops up, such as an emergency car repair or a large electricity bill, they’re forced to go into debt to pay for it.

This doesn’t mean that these people are destined to suffer financial troubles for the rest of their lives though. No matter how old you are, there’s still always time to get yourself back on track.

Start Saving Today

The younger you are when you whip your finances into shape, the easier it will be. This is partly because if you do it while you’re older, you’ll be trying to break long-held habits.

There’s also a mathematical reason. If you want to retire with a relatively modest income of  £19,000 per year when you retire, you’ll need to have saved around £260,000 in a pension (depending on how long you expect to live).

Assuming an average compound interest rate of 7% per annum, someone paying into a pension from the day they turned 18 to the day they turned 67 would only need to deposit £65 per month to hit this target. However, someone starting to make contributions from the age of 30 would need to be making payments of £170 per month.

Even if you have a low income, paying £65 per month instead of £170 is going to be much easier.

Once you have retired, you can still get your finances in order to make the most of your pension income.

If you’re already 30, then starting now is going to be better than putting it off for a few more years, so don’t delay!

Set a Budget

Trying to manage your money without a budget is like setting yourself a New Year’s resolution to “eat more carrots”. How many carrots do you currently eat?

How many do you want to eat? When will you reach the optimum carrot-eating target? If you don’t define it clearly, your resolution is likely to fail.

You need to set a target and measure your progress, otherwise, you won’t know what you’re aiming to achieve or whether you’re succeeding or failing.

You don’t need a degree in accounting to set a budget either, just some basic maths or computer skills will be more than enough. You can find plenty of spreadsheet templates and apps that you can use to help you including You Need a Budget (YNAB), Mint, Yolt, and Emma.

Some are free, while others have subscriptions. Even the paid budgeting apps are good value since they’ll help you save more than they cost.

If you prefer, you can even use a good old fashioned pen and paper to create your budget.

Once you’ve set it, keep an eye on it, tracking your spending against your budgeted figures to make sure you stay on top of it. If you regularly go over in one area or you find that you underspend in another, make adjustments as you go.

wallet, credit card, cash

Find Ways to Cut Your Expenses

There are things you can do to save money in just about every area of life, such as driving gently and switching energy providers.

To make the biggest impact, go for the low hanging fruit first. If you have an expensive satellite or cable TV subscription, you could likely save yourself the best part of £100 a month (or even more in some cases) by canceling your contract and using a streaming service.

Netflix in the UK costs as little as £5.99 and even the most expensive plan is only £13.99. You can also use niche streaming services like Crunchyroll and PokerStars TV that serve up much of their content for free and give you options to watch on your smartphone, tablet, and even your smart TV.

Other quick wins include canceling subscriptions you no longer need and transferring your credit card balance to one that offers 0% interest.

As you complete these, slowly look for new ways you can make extra savings that don’t create too much effort on your part.

Get into the Habit of Saving

Now you’ve cut down on spending, you need to put the money you’ve saved to work. Some financial experts say you should keep three month’s worth of expenses to one side in case you suddenly find yourself out of work. You may want to increase this to six or even 12 months if you think it will make you feel more comfortable.

It’s important to keep this cash safe, so put it in a savings account with a bank that is licensed and authorized by the Financial Services Compensation Scheme, or the equivalent scheme in your country. This protects your money (up to a certain threshold) if the bank becomes insolvent.

You should also look for a savings account that pays interest. Unfortunately, for much of the last decade, interest rates have been pretty poor for savers and this has been made even worse with central banks like the Bank of England and the Federal Reserve cutting their base rates over the last year or so. There are still some out there though, so use a comparison service to find the one that’s right for you.

Once you’ve built up a cash buffer, you will want to set new savings goals. This may be to save for a new home, your wedding, or simply put it away for a rainy day. Depending on when you’ll need the money, you may want to think about investing some in stocks, shares, bonds, or other assets. These typically offer higher returns than savings accounts.

Thankfully, apps like Chip, Moneybox, and Acorns all offer you the ability the make automatic saves using rules you define or with AI that connects to your bank account to calculate how much you can afford to put away. By automating your savings in this way, you can take all the hassle out of it and squirrel more of it away.

Once you’ve completed all of these steps, you’ll be well on the way to better financial health. Just be sure to keep track of everything so you know how you’re progressing.

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