There are many different ways to manage your finances. Some Britons are most comfortable micromanaging their cash flow, accounting for each expenditure and bit of income. Other people are more inclined to take a passive approach, reacting to financial dilemmas as they arise, without being overly proactive about money. Each approach has consequences, so it’s important to recognise how your personal money strategies can impact financial outcomes.
Even the most thorough planners are vulnerable to financial circumstances beyond their control. From inflationary pressure to interest rate increases, general economic conditions have substantial influence over each person’s monetary conditions. Some would argue that unpredictable economic trends are a good reason not to fret over finances, because you can’t control everything that impacts your financial health. Others might say that factors beyond your control make it even more important to keep a strong grip over your finances.
Despite these different money management philosophies, a large number of Britons share at least one common belief. Regardless of the underlying motivation behind personal financial activities, most people agree that saving money is a worthwhile pursuit that can help stabilise household finances. Here are a few popular techniques people use to keep spending low and steady their financial flow.
Bank Where Your Money Grows
With so many financial concerns to watch over, it’s easy to lose sight of some of the details. Your banking habits are easy to take for granted, but you may be able to improve your financial outlook by changing banks. Many High Street institutions pay miserable interest rates, below a full percentage point. However, the industry is competitive, so you can do better with your money.
Each bank or credit union offers unique terms, so it is important to make accurate comparisons, before drawing conclusions. An account that pays a higher interest rate, for example, may not be the best banking value if it also charges recurring fees. It’s easy to work out the bottom line on banking options by comparing accounts online or by directly contacting banks. These common requirements are things you should look for when evaluating banking options.
1. Direct Debits – Banking has increasingly become more automated, so financial institutions are set up to conduct remote business. In order to get the best interest and terms on your accounts, you may be required to establish a certain number of direct debits each month. Paying your mortgage or other bills directly from your account is convenient, so meeting the requirement is well worth earning extra interest.
2. Monthly Deposits – Banks and credit unions count on steady deposits to conduct business, so they are willing to offer higher returns to customers committed to making regular monthly payments. Getting the best interest rate often only calls for monthly deposits totaling £500 or £1,000, so you may not have to change your banking habits, at all, to land a better rate.
3. Fees – Some accounts offer cash back on bill payments and other perks, but you should be aware of fees. It’s up to you to measure the costs and benefits of various alternatives, and then select the account that best fits your circumstances.
Reduce Monthly Outgoings at Home
The money you pay each month in household bills represents your spending baseline. You can’t necessarily eliminate expenses such as energy, communications, TV, food, and insurance, but you may be able to find savings in your household budget.
If you feel as though you’re overpaying for fundamental services, start by evaluating your energy tariff. When your standard variable tariff doesn’t look like the best deal, switch and save as much as £300 on annual energy costs. Similarly, your phone and TV spending may present room for savings. If your services overlap or you pay for products you seldom use, cutting or changing subscriptions can lead to monthly savings. Cash back sites and store loyalty programs can also be used to reduce costs.
Set Goals and Realistic Spending Limits
Each move you make to reduce expenses helps reinforce your financial health. But if you aren’t confident and committed to sustainable spending, it is easy to fall back on unhealthy spending patterns. Even if you’re not a strict budgeter, it helps to set financial goals that keep you moving in the right direction.
Monitoring a specific set of monthly budget categories highlights your spending patterns, giving you the information you need to establish a sustainable budget. However, you might not want to put in the time required to take this step each month. Even if you’re not dedicated to a strict monthly budget, outlining general spending limits is better than doing nothing, at all.
Whether you are a money micromanager, committed to a rigid budget, or you prefer a more casual approach to household finance, these three strategies can help you stretch your earnings and avoid financial difficulties.