A big part of our role as financial advisers is to help our clients spend their money wisely and focus on ways they can reduce their outgoings. The aim is to make sure their financial plan is fit for both their short-term and long-term goals.
The current crisis resulted in many people, no matter how well-off they were, having to change the way they spend their money. This is important for ensuring you are protected from whatever planned and unplanned events the future may bring. By sharing our golden rules for structuring your finances, we can hopefully help more people to take control of their finances. After all, it can be empowering to do this and have peace of mind that you are doing the right things.
1. Identify all incomings and outgoings – by creating a simple spreadsheet with what is coming in and going out of your account, you can keep track of what you spend, when and how. You can also see what is coming into your accounts that will cover any spending. You can then start to make plans with what is left over for luxuries likes a holiday, clothes and dining out. Then there are the long-term things like investing in your children’s education, a new house or whatever it might be that you are working towards.
2. Save for the short-term – while we all like to splurge, financially savvy individuals plan for this and try to keep this to a reasonable level. High net worth individuals obviously have a lot of money coming in, and the tendency can be to keep spending. It’s important to ask yourself, do I really need this right now? Do I need this at all? Could I invest the money instead and then work towards buying my dream car, house, or a holiday in the future when I have saved the money?
3. Where can I save money – when you are aware of your outgoings, you can look to make sure you are on the best mortgage rate available to you, the best broadband package, mobile phone contract and so on. These should be reviewed on an annual basis to see if there is anything better in the market for you.
4. Invest for the long-term – It’s important to remind yourself that investments provide a stable future for you and your loved ones. The short-term gains you may benefit from by dipping into your investments could result in an uncertain future when your circumstances change, and your incomings drop.
5. Selling assets – if you have a short-term goal, it is crucial that you look at other ways to free up cash rather than dipping into your investments, which are there for your long-term future. By selling high-value items such as jewellery and cars, you can free up the money you need.
A financial adviser can give you the help you need to get started or keep on track with all of this. Our team are happy to help.