Start small: how doing something small now can help you down the line
Small changes or actions can make a big difference. It’s applicable to several walks of life, and holds true when it comes to your personal finances as well. What seems like a small action now can have big benefits to you down the line.
Look after the pennies and the pounds will look after themselves
Like it or not, the first step in making any changes to your finances is to make sure you know what’s going on now. Most people already do, but there’s no harm in digging out your latest statements and double checking that you’ve got an up to date spreadsheet of your bank balance(s) and investments.
Not only does keeping an eye on these things regularly make sure you know what money you’ve got, where it is, and what you’re spending, it also means you’re more likely to spot any fraud that’s slipped through. Banks are getting better and better at picking up suspicious payments, but it’s worth keeping your own eye on things as well.
Make a budget
If you don’t already, from having checked your accounts to budgeting is an obvious step. Having a guideline budget based on expected income and spending means you can gauge how much of a cushion you have, and from there whether it’s sensible to either add to existing investments or investigate new ones.
For rainy days
Many people find it helpful to set up an ‘emergency fund’ when they can. This is a savings account that you can easily access in times of real need, but that you’ll aim to forget about except for making deposits and checking the statements. After any initial minimum payment for setting up an account, making small but regular transfers will eventually add up – a self-generated fund for rainy days.
Online saver accounts tend to have higher interest rates than regular accounts. As you usually can’t get a card and can only access the money by transferring it into another account, they’re a great way to strike a balance between investments and making sure if something unexpected and urgent comes up you’ve got some funds to dip into.
Not just in the general sense of ‘I should save up’: think about times ahead when you expect to need extra funds for a specific purpose – when in your life would you expect to be buying a new car? Or paying a deposit on a flat? – and look at possible investments to cater for those.
For example, fixed term ISAs aren’t going to give massive returns, but over 3-5 years, the interest does start to add up. Taking advantage of any windfalls or current profits to set aside an investment for something you know you’re going to need saves a lot of stress later on.
Planning ahead also means reviewing options and thinking critically about the pros and cons of different investments. Even the options you discard now may become useful later on, and if nothing else you’ll have picked up a little more knowledge about the system – which will help inform later decisions.