How to build up your money confidence
How to build up your money confidence
It’s safe to say that we’ve all had a lot to worry about over the past 18 months. With so much uncertainty brought around by COVID-19, we’ve had to make it through a period where the outlook has ranged from grey to bleak.
Thanks to the economic instability caused by the pandemic, one of the biggest areas of concern for many people has been their personal finances. In fact, around half of Brits (48%) said that they had experienced money worries during this difficult time, according to research by the Money & Pensions Service.
Now, with things looking more settled here in the UK, you may be thinking about ways to improve your finances, and it all starts by rebuilding your confidence when managing money. By thinking positively and taking the right steps, you can give yourself the boost you need to become more secure.
Get a picture of your finances
As the saying goes, knowledge is power, and you can do much more when you’ve built up a full picture of your finances. Once you have all the information, you’ll be able to make informed decisions, as well as feeling confident you have a handle on everything.
Spend some time pulling together and reviewing all the aspects of your finances from a top level, including your salary, savings, and debts. Consider whether you are moving in the right direction: are your debts rising and your savings stalling? Or have you been able to build up your savings and reduce your debt? This exercise can be helpful in deciding which aspect of your finances needs the most attention.
With a direction in mind, you can plan a monthly budget to address any imbalances. Start by pulling together all of your fixed costs (bills, rent or mortgage, debt repayments etc), and your life essentials (groceries, clothing, transport etc) to find out how much your minimum spending will be. You can then look at the disposable income you have left over and decide whether you need to make adjustments. For instance, you may be able to make bigger repayments on debt or save more each month.
Set yourself some goals
It can be more difficult to build your money confidence when you don’t have anything to look forward to. Setting some goals for your finances can help to reinforce why you’re taking more control of your situation, as well as giving you something to work towards and measure your progress against.
Now that you’ve got a better understanding of your finances, you should be able to pick out goals that are sensible and achievable. For example, if you’re paying off credit card debt, you might want to cut the amount owed in half by the end of the year. Or, if you’re lacking in the savings department, you might want to start up a rainy day fund.
Please note: in most cases, it’s worth prioritising expensive debts over saving when you are setting your goals, simply because they will cost you more in the long run. Even if you can get a good rate on your savings, chances are an expensive debt will cost more than you can earn in interest.
Save up an emergency fund
When the unexpected happens and you find yourself having to cover the cost, it can be a worry for your finances. However, if you’re able to save up an emergency fund, you can give yourself peace of mind that there is some money set aside. This can really help you to build your money confidence, as you’ll have a safety net to hand.
It’s worth noting that while having an emergency fund can be useful, you shouldn’t prioritise it if you have expensive debt that you’d be better off paying. But if you are able to start one up, it’s generally recommended that you save at least three months’ essential outgoings to cover fixed and living expenses (both of which you identified when creating your budget). This way, you’ll be well covered for emergencies.
To make sure you can get to your funds when you need them in a pinch, it’s advisable to save into an account that allows you to quickly and conveniently withdraw. We offer our Instant Saver, which is an instant-access account that also offers a competitive interest rate to grow your savings. It’s also simple to open through our app, and there is no minimum deposit required.
Build your credit record
With more confidence in your financial future, you can start to consider the bigger picture. This may involve looking ahead to life-changing decisions, like taking out a mortgage or buying a car. Or, you may feel more confident in applying for a loan to start or grow your business. However, a lot of these next steps will be tied to the state of your credit record, which may need improvement if you’ve been having a tough time.
Your credit record (sometimes called a credit report) gives a breakdown of your credit history, summarising how you’ve gone about taking out credit and repaying your debts. They are compiled by a credit agency — Equifax, Experian and TransUnion are the three main agencies in the UK. A lender will likely carry out a check on this record before agreeing to a loan, so if you have had credit issues in the past, they may hold you back. Read our blog on factors that can affect your credit for more information.
Thankfully, alongside your growing money confidence, there are ways to build up your credit record. The best way is to continue meeting your commitments to any debts you have in a timely fashion until they’re paid off. It’s also worth reading this guide from Equifax and this guide from Experian to discover other ways you can improve things.