10 tips for effective money management

money management

Need help with your money management?

money managementIf you want to manage your money more effectively, you can get started right away. Of course, you first need to know what to do to achieve better money management.

The good news is, there are simple rules you can follow to manage your money better and significantly improve your finances. So, we’ve compiled the following ten rules to help you improve your money management.

1. Shop around for better deals

Paying recurring bills via direct debit or standing order may be convenient, but it means the amount you pay can rise without you noticing. Therefore, you should regularly check how much you are paying. Doing so will enable you to shop around for a better deal.

If you notice your regular payments increasing, you can check on comparison sites for cheaper alternatives for utilities, insurance, mobile phones, broadband, etc.

Surprisingly, if you shop around, you’ll be in the minority. Despite being able to make considerable savings, many people seem reluctant to hunt down a better deal.

2. Prioritise tackling debt

Debt is not only financially stressful, but it can also have a significant emotional effect. Having debts hanging over your head makes life challenging to enjoy, so it is crucial to clear your debts as quickly as possible.

When you set about clearing your debt, you should begin with those with the highest interest rates. That’s because the more interest you are paying, the less money you have to reduce the capital amount borrowed.

Whenever possible, you should make over-payments, as this will significantly speed up your debt elimination. However, clearing your debt takes time and effort, so don’t allow the pressure to overwhelm you. If you need assistance with debt management, debt counsellors are available to help.

3. Concentrate on yourself more

Providing financial support to family and loved ones is normal, and it is an admirable characteristic. According to research on financial assistance to relatives, around half of 18-45 year-olds have been financially supported by their parents.

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This financial support includes sums of money up to £5,000, and most parents don’t expect to get the money back. While it is admirable that you want to help your family, you should not allow it to jeopardise your long-term financial security. After all, the less money you have for retirement, the less help you can be to your family. Therefore, don’t be afraid to concentrate on yourself more.

4. Invest some of your money

As well as spending your money, try to invest some too. Although it can feel like most of your money has gone before it even arrives in your bank, it can be hugely beneficial if you make regular investments.

There are plenty of ways to invest some money and get a financial return. The type of investments you make will depend upon your level of risk and the length of time you want your money invested.

For instance, cash ISAs are an ideal vehicle for short or medium-term investments. Although the interest rate may not be great, you can benefit from tax efficiency through ISAs.

You can invest up to £20k per year into an ISA without paying any tax on the interest you make. However, you should understand the notice you have to give to access your ISA savings, as there may be restrictions.

For a long-term investment, a pension is a powerful way to save your money. One significant benefit of pensions is that the money you contribute to them is exempt from tax. This relief applies to contributions up to £40k each year or the value of your annual salary, whichever is lower.

With a pension, your money is locked in until you are 55. Therefore, your pension pot will have plenty of opportunities to grow. Your money will benefit from compound interest growth during this time, which significantly boosts your retirement funds.

5. Start budgeting

Establishing a realistic budget and sticking to it takes considerable willpower. However, the effort is well worth it, as you will quickly gain control over your finances. However, it has never been more convenient to blow your budget with the abundance of cheap credit available and the onslaught of online advertising.

Budgeting will help give you the discipline needed to stick to spending within your means. To get started, set up your direct debits and automated payments to leave your account as soon as you get paid. Doing so will allow you to see how much you’ve left to spend for the remainder of the month. If you need help with budgeting, there are plenty of free applications that will assist you with tracking your spending.

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6. Don’t refuse free money

It might seem ridiculous that anyone would consider refusing free money. However, that is precisely what is happening with many people as they opt out of workplace pension schemes.

If you are employed, 22 or over, and earning more than £10k, you will be auto-enrolled into a workplace pension, and this is where the free money comes from. On top of your contributions, your employer adds another 3% of your salary. This money would not go to you were you to opt-out of your workplace pension.

Another form of free money you get through your pension is the tax-free element of your contributions. Again, if you opt-out, you don’t benefit from this free money. Is there any actual decision to make? Surely, staying within your workplace pension is a no-brainer!

7. Plan for the unexpected

No plan survives contact with real life! Regardless of how much planning you do, you can guarantee that something unexpected will crop up in the future. Such eventualities could be as trivial as minor car repairs or as significant as finding a new job. Therefore, it is wise to have a fund set aside to cater to such emergencies.

Your emergency fund’s size will vary depending on your needs. A good estimation is to have sufficient funds tucked away to cover your living expenses for between 3-6 months.

8. Get your finances organised

Having all your finances lumped together in a single current account might lead you to believe that you are cutting down on administration, but the opposite is probably true. Just as you would store different file types in different folders, you should consider doing the same with your finances.

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For instance, it doesn’t make sense to have your savings lumped in with your daily spending money. Also, you might not want your emergency fund locked away with long-term savings. Creating separate and appropriate accounts for each aspect of your finances will get them organised and help you manage your money better.

9. Watch your digital spending

We mentioned earlier the need to shop around, and that is never as applicable as it is with digital products and subscriptions. It is easy to be lured into subscriptions with appealing introductory deals. However, when these deal periods end, the rates can increase considerably.

Watch out for what you are spending on such things and ask yourself if you need them before purchasing. Also, regularly review those subscriptions you have, and if you are not using them to the fullest, consider downgrading or cancelling your subscriptions.

10. Keep an eye on your pension’s performance

Your retirement may seem a long way off, or it may only be a couple of years away. Regardless, you should keep an eye on your pension investments to ensure they perform as you expected.

High fees and poor performance can significantly affect the amount in your pension pot. Failing to check on these things means that you can’t take action to correct them. Therefore, keep an eye on your pension’s performance to help maximise the funds you have for your retirement.

If you are looking at options for your pension, get in touch with a regulated pensions specialist like Portafina or, view the information at Money Helper.


About Grace Murphy

As an experienced writer whose written for publications across the lifestyle, leadership, personal development and beauty spaces, I can show dynamic readers the tips and tricks that can enhance every aspect of their lives. My articles are designed to inform and inspire, giving readers the chance to see the world in a new light and achieve their dreams.