Last year was filled with uncertainty, fear, feeling out of control and being subject to restrictions in our daily lives. We may still be limited in what we are able to do, but in the area of our finances, we can start to take back control and lay the foundations for positive financial wellbeing. This starts with great personal financial planning.
A financial plan must start with a basic review of the essentials to make it realistic and workable. You need to take a look at your existing monthly budget, income and expenditure. Question if there are savings that can be made by reviewing things such as utility bills for a better deal. Do you have any unsecured borrowing such as overdrafts, credit cards and personal loans? Is there an opportunity to reduce or pay a bill quicker? A good place to start is with borrowing that has the highest interest rate, once you have assessed this, you may find yourself with available funds which can then be diverted elsewhere.
Once debts are under control, you can look at whether you’re able to put some money aside to build up some savings for emergencies such as a boiler breakdown in the middle of winter, or an unexpected mechanic bill. Having this cash buffer means that you have a cushion from unexpected costs without having to resort to further borrowing.
At OpenMoney, there is a financial health check facility which can help to move us towards becoming more proactive with our financial wellbeing so that we can build up savings and look towards investing in the future, if it’s the right decision for you.
In the next blog of this series, we will look at creating a framework to help us identify our personal financial goals, the steps we can take to achieve these and how we can develop our financial security.