Eight everyday money management tips all adults should know

We’re moving from a nation of savers to borrowers, figures from the Office of National Statistics (ONS) suggest. UK households are supporting their spending by taking on debt and dipping into savings. With interest rates starting to rise and an increasing cost of living, money management remains important.

The statistics revealed:

  • UK households spent more than they earned; the last time this happened was nearly 30 years ago
  • Over the year, households took out nearly £80 billion in loans, the most in a decade
  • But deposited just £37 billion with UK banks, the lowest figure recorded since 2011
  • On average, each UK household spent or invested around £900 more than they received in income.

While the current financial environment is better for borrowers than savers, due to the low interest rates, money management is still important; especially when future rate rises are considered.

Here are eight everyday money management tips that all adults should implement:

1. Create a realistic budget

Your financial planning should start with a budget. This helps to inform your day-to-day spending and how much you can afford to save.

Starting with your guaranteed income, you should break down where this money will be going each month. Begin with your essential outgoings, such as mortgage payments and utility bills. From here you’ll be able to allocate the portion of your income you want to spend on entertainment, luxuries, savings, and asset building. With a realistic budget that you revisit regularly, you’ll find it easier to manage your money.

While you might be tempted to account for every penny, having some wiggle room is beneficial. This can help you to cover bill increases or other unexpected outgoings.

Remember that your budget should cover short, medium and long-term needs, ranging from building an emergency fund, the cost of moving house and saving for retirement.

2. Understand the most efficient ways to save

It might seem like your saving options are limited at the moment, with interest rates so low. But choosing the most efficient saving vehicle can boost the money you put to one side.

The most efficient way to save will depend on what your goals are and the timeframe. An individual who is saving with retirement in mind, for example, will use a very different strategy than a family that is saving for a holiday in six months’ time. Contact us to discuss your current financial situation and long-term goals to find the right savings option for you.

Ideally, you should have both a short-term savings account, that’s readily accessible in emergencies, and a separate fund that’s for your long-term goals.

3. Make the most of government help

Building on the last point, government support can help with your savings. The government has launched several initiatives that aim to encourage people to save more. As a result, these can boost your deposits.

One example of this is the Lifetime ISA (LISA) which, if eligible, allows you to deposit up to £4,000 annually and benefit from a 25% bonus if you’re saving for a first home deposit or your retirement. The Help to Buy scheme is another option for first-time buyers to consider. It may let first-time home buyers step on the property ladder sooner and reduce the interest paid on their mortgage.

Both Cash ISAs and Stocks and Shares ISAs benefit from being tax efficient too, helping your money to grow faster.

4. Shop around for better deals on household bills

Household bills probably account for a significant portion of your monthly outgoings. If you’ve stayed with the same provider when your original deal has come to an end, you could be paying more than necessary.

For utility bills, it’s important to look at your usage levels to see if you’re still on the best tariff available. You could find that your current provider has a better option or that you’ll benefit from going to a competitor. For other bills, including internet, mobile phones, or TV packages, you’ll often find that the best deals are reserved for new customers.

Shopping around and switching might seem like a chore but the combined savings could amount to hundreds of pounds every year.

5. Manage your credit

UK residents are increasing the amount of credit they use. If that sounds familiar, there are steps you can take to reduce the interest you’ll pay.

When borrowing it’s important to understand what you can afford to pay back. Credit is incredibly useful at times but spending borrowed money without a repayment plan can be costly and lead to you paying thousands back in unnecessary interest.

Where you have credit that you’re paying interest on, look at transferring the balance to a 0% interest card. This gives you more time to pay it off without incurring extra charges.

During your life, one of the biggest types of credit you take out is likely to be your mortgage. Taking steps to access the best interest rates possible, such as improving your credit score, can help you reduce the cost of borrowing. Once a mortgage is in place, making payments on time is crucial, while overpaying when you can could reduce the overall amount of interest you pay significantly.

6. Maintain a good credit score

While we’re on the subject of credit, maintaining a good credit score should be considered a priority. If your credit score is considered poor, taking steps to build it back up is beneficial.

Your credit score plays a significant role in the credit options you can choose from. A good credit score means that when you want to borrow, you’ll usually end up paying less for it. Whether you need to put new household furniture on a credit card or will be taking out a mortgage, lower interest rates will certainly help.

There are many steps you can take to improve and maintain your credit score, such as ensuring you’re registered on the electoral roll, paying bills on time, and not using all the credit available to you.

7. Plan for your retirement now

While the State Pension is unlikely to cover all your retirement needs, it forms the basis of many people’s pension. Understanding how much you can expect to receive and when can aid in your planning. You can check your entitlement to the State Pension by clicking here.

It’s never too early to start thinking about your retirement and pension. As part of money management, it’s good practice to put some aside to ensure your later years are comfortable and enjoyable. Whether you’ve just started working or are approaching retirement planning your life after work is important.

If you’re in employment, it’s likely you’re already contributing to a Workplace Pension unless you’ve opted out; which would mean you’re missing out on employer contributions and tax relief. On top of this, you may want to consider contributing to a private pension, using a LISA, or investing with the long term in mind.

8. Decide on your priorities

While there are money management tips that apply to everyone, it’s important to recognise that it’s not one size fits all when it comes to planning your finances.

Deciding on what your priorities are can help to make your monthly finances match your wider goals. So, whether your priority is to pay off the remainder of your mortgage early, travel in your retirement years, or pay for your children’s education, you’re always working towards the bigger picture.

Understanding what your key drivers are mean you’re in a better position to ensure your day-to-day budget reflects the long term too.

Talk to us to incorporate all of this, and more, into a financial plan which will keep you on the straight and narrow.