Finances are probably one of the biggest worries any family has. A healthy bank account can make a big difference in everyday life. So you can understand why it is extremely important to take good care of your money. Healthy finances mean you can enjoy life a bit more right now, and you will be able to save for the future and your retirement.
However, keeping our finances under control is no easy feat. Especially if you do not have much knowledge of the economy and markets. Even if your knowledge is limited, it is still a good idea to try and get to grips with the very basics. This will help you avoid common mistakes people make with their savings and cash flow. Don’t worry if you are completely new to all this. Here is my guide to everything you should know to make your finances much healthier.
Plan Out Your Money
It is crucial to take the time to budget your money. This will give you a clear idea of how much money you have to play with. It will also give you a good idea of how much you can afford to save each month. When you budget, you should take everything into account – look at all your bank accounts, investments, and incomings. You should figure out how much you have in total and how much you have come into your family every month. Then you can decide on an amount to spend on all your monthly bills and shopping. If you have the time, you and your partner should take a look at the budget once a month. This will help you make sure nothing has changed and decide whether you can continue spending your money as usual. Buy a planner and enter all your information and figures into it. Then you can always take a look and check everything is going to the plan throughout the month. It also means you don’t have to remember a whole load of figures!
Invest Your Money
High-interest bank accounts are a great place for your money. However, you should also consider placing some of it in some other investments as well. Some of the most common stocks and shares can easily be purchased through a broker online. Each stock and share equates to a percentage of the company. So, in effect, you are buying part of your chosen company. Then, as the company’s value increases, so does the value of your stocks and shares. However, don’t forget that companies can also decrease in value. If this happens, then you can expect your share prices to fall as well. But don’t be disheartened; you just need to ride out the storm and wait for prices to rise again.
You don’t have to restrict your investments to just stocks and shares. Many other investments are worth looking into. Why not place your money in funds? To do this, you buy into a fund and your money is then left to that fund’s fund manager. He will then invest the whole pot of money from the fund into various investments. The whole idea is that these will increase and therefore have a knock-on effect and make your portion of the fund also increase in value.
Diversify Your Investments
One of the best ways to prevent your investments from losing too much money is to diversify. This is considered one of the best ways to reduce the risk of investment. So what exactly does diversifying mean? It just means you need to spread your money around and invest in different things. If you only have one big investment, then your finances will take a big hit if the price of that company falls. So instead of investing one big lump sum, you should split it up into smaller amounts and invest them in various things. Invest in both stocks and shares and funds. And try to invest in different kinds of companies.
For example, place some money in tech companies and some other money in small start-ups. It is also a good idea to invest in different companies. So don’t just stick to businesses that are based in the UK. Take a look at American companies as well as ones in Europe. Different countries’ markets will fail at different times. So if you have some American shares and their values dip, your UK-based ones could be enough to keep your investments in profit.
You may have a lot of money tied up in your home. If you are feeling strapped for cash, it could be a good idea to tap into this cash. If you have a lot of extra space in your home, then it could be worth downsizing to a smaller property. Lots of couples choose to do this once their kids have grown up and left home. The smaller property will be cheaper than your current place so you will be left with some profits from your sale. This cash can then be invested or used for some emergency spending you need to do. Not sure how much you might be able to get for your current home? If you can’t afford to buy another property right now, but still need to sell your current house, simply move into a rental property for the time being.
Save Something For The Kids
Every parent wants to give their kids a great head start in life. And what better way to do this than by starting a nest egg for them? If you can afford to, start putting some money away each month for your children. It doesn’t have to be a lot, even just £10 a month should do. As your kids grow up, the amount in their bank accounts will slowly increase. You can give them this as a gift for their 18th or 21st birthday. If they are sensible, they will put it towards university tuition, a house deposit, or place it in investments. The earlier you start with the nest egg, the more you will be able to accumulate for your children. If possible, open a bank account while you are still pregnant. However, if you already have older kids, don’t think you’ve left it too late. It is never too late to start saving for your family.
Savings Accounts Are Key
If you just keep your money in a current account, there is no chance that it will grow. To ensure your money increases over time, the least you can do is place it in a high-interest savings account. The higher the interest rate means that your money will get more interest added to it each month. And the more money in the account will increase the amount of interest. So for maximum benefits, keep your high-interest savings accounts topped up as much as possible. Don’t have much money left over at the end of the month to squirrel away? No problem; there are still plenty of innovative ways to increase your savings. But one of the easiest is to cut down your daily spending. If you live well within your means, you will find it much easier to save enough cash to add to your savings accounts.
Keep An Eye On Everything
Once you have invested your money in various places, keep a regular check on it. The banks and fund managers won’t give you a phone call if it looks like you are about to lose all your money. You will need to be proactive and make yourself aware of any major risks that are being forecast. To do this, read the money and economics supplements in newspapers so that you are aware of the latest trends. Have a quick look online at financial websites as well. You need to check your investments regularly, for example, every couple of months. However, be careful not to obsess over them. If you check them every day, you may be more likely to panic during a bad period and pull out your money prematurely. As many of these investments are long-term, it is best to try and keep your money in them during any bad economic periods. The market will sort itself out in the end, and your money will eventually grow in the end.
Hopefully, this guide will give you lots of useful information about money. You now have everything you need to know to make your family’s finances much healthier. As you can see, it is all about getting smart with your cash and spending some time to plan everything out. Investments are also important as well, especially if you want your money to grow or provide you with an income. It may sound risky to beginners, but investing is certainly worth it, especially for your whole family’s future.