This week is Financial Planning Week – the perfect time to take a look at your finances and get things in check. With the kids back at school, we all know that Christmas is just around the corner…make some changes and improvements to your finances now to make sure you won’t be penny pinching come Christmas!
1. What do you want out of life?
Start your new financial fitness regime by identifying the goals in life that are most important to you and your partner/family, and start to plan for them.
???? In the short term e.g. nursery fees, next year?s holiday, changing your car
???? In the medium term e.g school fees, career change, moving house
???? In the long term e.g. university fees, weddings, looking after elderly parents, retirement;
Try to work out the costs of each of your goals and also apply timescales to each of them and if you?ve got a partner, make sure you discuss it with them first.? Write your goals down and review them regularly.
2. Live within your means
Work out what you earn and also what you spend each month. Be honest with yourself and include everything you spend money on. Keeping a spending diary for a month will help (and shock) you. Set yourself a spending plan and make sure you stick to it. You should spend less than you earn, but if you don?t then work on ways to cut your costs and/or find other ways to increase your income, rather than borrowing to pay bills or to pay for shopping/holidays.
Other tips? Make sure you claim benefits you?re entitled to. Visit www.directgov.org.
3. Control debt
Borrow only what you really need and, before you commit, know the true cost of your debt – interest charges can greatly increase the total cost of a purchase. Work out a plan to pay off your debt as quickly as you can. You may tackle your high interest debts first, like credit cards although be careful to prioritise mortgage repayments, tax bills, utility bills too as non payment can have very serious consequences.
4. Plan for the unexpected
Being a mum means having commitments to making sure your family can cope financially under all sorts of circumstances. Make sure you provide for them in the unfortunate case of ill health, an accident, premature death etc. Find out from work what you would be covered for ( if anything) otherwise consider insurance policies, as otherwise your finances ? and lives -? could easily be derailed.
Did you know?? A recent study calculated that on average mums spend 74 hours per week on household chores such as cooking, cleaning and looking after their children.? It would cost an estimated ?32,812 per year to pay somebody else to do these tasks if they were ill or died.? Dads spend an estimated 53 hours per week which would cost around ?23,296 (Source ONS) How would you cope if something happened to you or your partner?
Other tips on protection:
???? Are your main assets like your car and house covered by insurance?
???? Make your will and keep it up to date ? including appointing guardians for the children
???? Consider setting up a power of attorney as a precaution in case you cant handle your affairs personally
5. Stash some cash
Use a deposit account to save for an emergency fund or ‘cash cushion’ of? 3 months income (this is important to do even if you’re paying off a mortgage, but not if you’ve got high interest debt). This will help cover you for emergencies such as if your car breaks down or you lose your job.
6. Make saving a habit and consider investing too
Once you’ve paid off any high interest debts and have got your emergency cash cushion, get into the habit NOW of saving on monthly basis for your shorter and medium term goals e.g. the family holiday, a new car, Christmas, house renovations etc. According to research (from Liverpool Victoria) the on average a child costs ?195,000 over 18 years, with childcare and education costing most. You?d better get saving! Investments are not just for the rich. Investing in the stock market might be more risky but it can make your money work harder for you over the long-term for things like university fees. You can invest from just ?50 a month. Also look into ways to help reduce the tax you have to pay on your returns by using ISAs.
7. Retirement plans
It might seem like an age away, but make a financial plan for your retirement now. Do you have access to a workplace pension scheme? Even if you still have debt, seriously consider contributing to it, especially if your employer will make a contribution too. Otherwise, consider saving or investing using personal pensions or ISAs to accumulate funds for retirement.
8. Control your spending
When shopping ask yourself: Do I need it? Can I afford it? If not, forget it. If so, can you get it cheaper elsewhere?
9. Shop Around
It?s a shame but these days loyalty just doesn?t pay!? Shop around to get the best deal for your utility bills, phones, broadband etc. You?ll be amazed how much you and your partner can save, creating room for you to put more aside to help reach your goals.
10. Visit www.financialplanningweek.org.uk ? a website created for Financial Planning Week 2009 to give you tips and tools to improve your financial ?fitness?.
