5 Easy Ways to Get Your Finances in Order
We’re all guilty of it. We head into a new year setting resolutions for ourselves, that, in spite of our best intentions find a way of waning after a few weeks or months. However, if there’s one resolution that you should stick to in 2022, it’s having a clear understanding of your finances. We’re sharing 5 ways to get your finances in better shape this year.
1 – Set Your Financial Goals
Without having a goal to work towards, it’s incredibly easy to live month to month without an incentive to drive your spending habits. Ask yourself what financial position you’d like to be in 3/6/12 months time. Would you like to clear all of your credit card debt or a car loan? Would you like to save 25% of a mortgage deposit? Do you want to put away enough money to be able to take a month of unpaid leave from your job? Figure out what your own individual goals are and write them down. From there it’s a matter of working backward to find out exactly what needs to be done to achieve them.
2 – Create an Emergency Fund
Besides working towards whatever financial goals you’ve set yourselves, one of the best things you can do is to create an emergency fund that you make regular contributions to. Having extra funds available for unexpected life events or expenses is essential in achieving financial wellness. Emergency funds need to be easily accessible, so consider setting up a low-yield savings account that you can withdraw from immediately or within a short notice period (e.g. 7 days). As a general rule of thumb, your emergency fund should ideally have 3-6 months’ worth of expenses in it, but everyone’s circumstances are unique, so determine what an emergency fund means to you.
3 – Scan Your Bank Statements/Review Subscriptions
You don’t need to be a financial analyst to determine where your money is going at a high level. That’s because you are the one who is spending it – so you are on some level aware of your habits, whether it’s popping into the shops to buy dinner every day, or regular online shopping hauls on payday. Scan your bank statements for the past few months and see if you can notice any obvious trends. Seeing your transactions in black and white will help you get a better understanding of your outgoings and, as a result, some changes that you may need to make in order to achieve a healthier bank account.
One highly-effective exercise that everyone can do is to make a list of your monthly subscriptions. It’s very easy for direct debits to slip through the cracks, where you are charged monthly for services that you may or may not actually use. Contact your service providers to cancel any unnecessary subscriptions and try to get better offers on your utilities- broadband, electricity, insurance, etc. Do your homework and consider switching to alternative providers if you can get a better deal elsewhere. What may seem like a hassle can actually really make a difference to your bank balance in the long run.
4 – Start a Pension
If you haven’t already started a pension, now is the time to take action. Whether you’re in your 20s, 30s, or 40s, you can and should be planning for your retirement, and setting up a pension is one of the best ways to do that. The State pension in Ireland is €248.30 per week or €12,912 per year and currently, the qualifying age is 66, and due to rise in the coming years. So if you don’t want to rely solely on the State pension to fund your retirement, the single most positive financial move you can make is to take control of your pension now.
If you do, on the other hand, already have a pension, or multiple pension pots, be sure that you review how they are performing, and whether or not you need to make any tweaks in order to get the most out of your pension fund. Transferring multiple pension pots into a Private Retirement Bond (PRB) can be a wise move, as when you leave an employee pension scheme, you typically lose the benefits as a deferred member. Whereas when all of your pension pots are under one roof, you can regain control of how they are managed and invested, meaning that the long-term return can be much greater.
5 – Speak to the Experts
If you want to delve deeper into creating a full financial plan, we recommend that you draw on the expertise of professionals. Developing a financial roadmap is more than just analysing your spending and creating a monthly budget. It can involve everything from cash flow analysis to pension planning and investments, taking your personal and professional situation and goals into account. Impartial advice is paramount here, with so many financial products on the market, you need to be safe in the knowledge that you are choosing the ones that best suit you, both in the short term and long term.