The foundation of good financial planning is understanding where your money goes.
Build a realistic budget and track your spending
Create a budget that includes rent, bills, transport, food and spending. Apps can categorise transactions, helping you spot patterns and cut unnecessary costs. Aim to review your budget regularly.
Establish an emergency fund
Unexpected expenses, such as car repairs or a sudden loss of income, can cause stress if you don’t have a buffer. Try to save at least three months’ worth of living costs in an easy-access savings account. Having this fund will reduce reliance on credit cards or overdrafts. There is evidence to show that young people are struggling with debt.
Make the most of workplace pensions
In the UK, eligible employees are automatically enrolled into a workplace pension. Contribute at least enough to receive your employer’s full match. If possible, gradually increase your contributions each year.
Use tax-efficient savings accounts
Take advantage of ISAs, which allow your savings or investments to grow tax-free. The annual allowance means you can put away up to £20,000 per tax year without paying tax on any gains.
A Lasting Power of Attorney is a legal document in the UK that lets you nominate someone, known as an attorney, to make financial decisions on your behalf if you lose the ability to do so in the future. You can find out more about making an LPA online at websites like //powerofattorneyonline.co.uk.
Manage the debt wisely
Prioritise paying down credit cards or overdrafts, and avoid borrowing for non-essential purchases.