Hi!
This week I want to give some practical tips on how you can improve your financial literacy. I hope it’s useful. 🙂
1. Always Have a Rainy day Fund
Experts will tell you that you need at least 3 months expenses saved up but in reality, most of us mere mortals don’t have that kind of cash in a cost of living crisis so if that is possible for you, great. But if not, even putting away a few quid every week / month all helps. 40% of brits can’t cover a £400 emergency without going into debt. You can take yourself out of this sad fact by squirrelling away whatever you can manage into a side account (make sure it is in an instant access savings account with a good interest rate earning you more each month. At the time of writing, 5% is not uncommon but this can and will change).
2. Saving Anything is Better Than Nothing
Starting off small is still better than not doing it at all. The small act of transferring over a little bit each month or even better, creating a standing order when you get paid each month to be transferred into your savings account creates a habit which will serve you well in the future. It all adds up over time, especially when the growth starts to compound, that is, if you start earning interest on top of interest each month.
3. Shop Around for the Best Interest Rates
Have a look what your current bank is offering and then compare it online using Money Saving Expert for example. They round up the best savings accounts dependant on your circumstances. You can usually get a better rate if you ‘lock’ away money for a certain period of time, but if you might need some of it in that time then obviously, don’t go for it, go for an easy access one.
4. Move Money Around When Rates End
Keep an eye on savings accounts rates as they often change or other banks may become more competitive. Make a note or put it in your calendar to compare current rate offers once or twice a year.
5. Money is Safer in Banks Than Under Your Bed
Aside from being eroded by inflation if you keep your money under the bed, it might also be stolen. Reputable banks should be covered by the Financial Services Compensation Scheme, which protects you for up to £85,000. Make sure the financial institution where you keep your money is covered by this.
6. Prioritise Paying off Debts
Using the avalanche debt repayment method, look at what your highest interest accruing debt is and focus on paying that down first, then tackle the next highest and the next. This way, you pay the least amount of interest while paying it off. Consider negotiating with the lender for a lower interest rate or an interest free break. They may even consider consolidating it into a lower interest loan or interest free credit card. It’s always worth asking, the worst they can say is no.
7. Try to Cut Things Out
Are there any old direct debits or subscriptions you no longer use? Do you really need that Starbucks? Can you take a packed lunch out with you or a water bottle? There are many super easy ways you can cut down without depriving yourself too much. I made a video about it this week:
https://www.facebook.com/reel/1674426406655025
8. Take Advantage of Free Money From Your Employer
Always pay into a workplace pension if you have the opportunity. If you’re over 22 but under state pension age, and earn over £10k a year with an employer, you most likely have been auto enrolled into your workplace pension. You can also opt into their workplace pension provider even if you earn less than £10k and are under 22, just ask your employer. But if you meet the first 3 criteria I mentioned (over 22 but under state pension age, and earn over £10k a year with an employer), your employer is legally obliged to contribute at least 3% of your qualifying earnings into your pension pot, which means free money! So don’t lose out. I have a post about workplace pensions too:
https://www.facebook.com/reel/1174082620505531
9. Chase Up Old Workplace Pensions
If like me, you’ve moved around employers on a frequent basis, chances are, you have multiple workplace pensions floating around. Consider consolidating them into one personal pension so you can better keep track of it. I called around my old companies and asked what pension providers they used and then called the pension providers to see if I had an account with them. You can also look up old payslips and see if you had any pension contributions coming out of them. I found 3 old workplace pensions in the end. I opened a Vanguard account (I’m a fan of the company and it’s founder, John Bogle), initiated a transfer through them (it was super fast and easy) and they literally did the rest. All I had to do is choose what I wanted to invest in. Which reminds me;
10. Don’t Be Scared of Investing
All pensions are invested, including your workplace pension. It’s usually put into a default fund of the companies choice, which might not be the best choice for you so make sure to find out which fund it is in and ask for copies of factsheets of all the funds they have so you can choose which is best for you. A good fund is diversified. Instead of guessing which company will do well and which won’t (that’s gambling, don’t be tempted), you buy into funds with lots of diverse companies that has a good track record on the stock market. I heard a saying recently and it was so good. He said “Instead of buying the needle in a haystack, buy the whole damn haystack”. And he’s correct, the more diversified, the better. I am working on making a video about investing sensibly, but it’s going to be a long one as there is lot’s to consider but investing is the only realistic way that most normal people can build any kind of wealth in their lifetimes. It’s precisely how most of the rich stay rich and get even more rich.
If you want help with budgeting, you can get my free spending planner now by signing up to my newsletter where you’ll also get my articles a whole month before I publish them here! What are you waiting for, sign up here now! > https://laurenjohnston.co.uk
*Quick disclaimer – I am not a financial advisor, I do not give financial advice and you are responsible for your own financial wellbeing 🙂
Lauren <3