Achieving your short, medium and long-term financial goals is all about doing the little things consistently. It’s all about picking up smart money habits.
Whether you’re saving for your first home, building an emergency fund or planning for retirement, good financial habits can set you on the right path. Here’s how to get started.
Understand where you are financially
The first step to being smart with your money is knowing where you stand. Review your income, expenses, debt and savings.
Create a simple budget to organise your spending. Free apps, spreadsheets or just a notebook can make this easier. Once you know where your money is going, you can find areas where you might be guilty of overspending.
Outline your debts, too. Highlight any with high interest rates that are costing you the most – these are best to clear first.
Set clear financial goals
Having clear goals gives you a reason to stick to your financial plans. Whether it’s paying off debt, saving for a holiday or building an investment portfolio, define your objectives and set realistic timelines.
Break them down into short-term (e.g. saving £500 in three months), medium-term (e.g. buying a car within two years), and long-term goals (e.g. building a retirement fund).
Being specific and realistic with goals and timeframes should ensure you don’t lose steam and can build consistently towards them. Although, things don’t always go to plan – and that’s okay!
Pay yourself first
You should always “pay yourself first” on payday, as silly as that sounds. Each month, allocate a portion of your income to savings (or paying off debt if you’ve got any) before spending on anything else.
Automating transfers to a savings account or ISA (Individual Savings Account) ensures you’re consistently putting money aside. With savings money out of the way early, you can hopefully avoid dipping into it throughout the month.
Control your spending
You’ve always got to watch out for impulse spending – it can derail even the best financial plans. Combat this by adopting the “30-day rule”: wait 30 days before making significant purchases to decide if you truly need them.
Also, practise mindful shopping by creating lists for the weekly shop or picking out certain clothing items that you need when shopping in-store or online.
Use credit cards for bad credit wisely to build your credit history and only spend what you’ll be able to pay off within a month or so. It shouldn’t be a way of spending with no consequences.
Accumulate an emergency fund
Life is full of surprises and an emergency fund is your safety net. Aim to save enough to cover essential expenses for at least a couple of months. Having this cushion can prevent you from falling into debt when unexpected costs arise, such as car repairs or parking fines.
Smart money habits don’t form overnight – they may take weeks or even months. Stick with them. These habits could transform your life.
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