When you start to become responsible for handling your own finances it can be exciting and liberating, but it can also be a scary time, as you go through the process of learning how to manage your own money.
Creating a Budget
The first step for anyone taking on new financial responsibilities should be creating a budget to track incomings and outgoings. Start by writing down all your bills and any money you need for social activities. Compare this to your income.
Write a new budget every week or month to keep track of variable expenses. This allows you to be certain of what spare money you have each month to spend on fun activities, without running the risk of overspending and not being able to pay your bills later in the month.
Consider setting up Direct Debits to pay bills automatically from your bank account. This will ensure you don’t incur charges for forgetting to make a payment.
People often don’t take time to contemplate the value of their possessions and the cost involved in replacing them. There are a few basic insurance products that everyone should consider.
If you are living in your own place you need to think about how you would replace furniture, appliances, clothes, electronics, etc., in the event of a fire or burglary. Contents insurance allows you to cover these items for a fixed amount depending on what you judge the value of the items to be at the time of purchasing the policy.
Insuring mobiles against theft, damage or breakdown has become more important in recent years with the ever-expanding array of high-specification mobile phones on the market. Again, consider how you would pay for a replacement and how important your mobile phone is for accessing the internet and keeping in touch with people.
Depending on your circumstances, you may also wish to consider income protection insurance to ensure you are able to pay bills if you are made redundant or develop long-term sickness.
Thinking ahead to your future is part of successful financial management. Aim to save 10-25% of your income in a tax-free savings account such as an ISA for emergencies. Financial consultants suggest that every person should save enough to cover between three to six months’ basic living expenses.
When you reach this goal you may wish to speak to an independent financial adviser to get advice on investing some of your savings.
Sophie works alongside Mobile Insurance and is currently in the process of helping her younger brother put together a budget plan for the month.