3 Quick Wins to Improve Your Financial Situation
Managing your finances doesn’t always have to be complicated. Here are 3 straightforward tips you can put into action to start seeing positive results in your financial life.
Quick Win #1: Sleep Better at Night
Build up an emergency fund. It’s a boring one and it can seem counterintuitive to have money sitting in your account that’s not invested, but if you have a minimum of 3 months' worth of your expenses set aside, then when your car needs a new set of tires or you need some dental work, you’re going to be able to draw on that money.
Knowing your expenses are covered is going to give you great peace of mind, rather than having to use your investments as a cash account, dip into that, and then have to top it back up. It gets messy.
Quick Win #2: Save on Income Protection Premiums
Jargon Alert! If you’re not quite sure what income protection is; it is an insurance that covers policyholders who are incapacitated and unable to work due to illness or accident.
If you have income protection, you would have had to choose a waiting period which is how long you would have to wait before the benefit starts paying you. The longer the waiting period, the cheaper your insurance premiums are, but on the other hand, the shorter the waiting period you chose, the more expensive your premiums are going to be.
So, if you have an emergency fund with 3 months expenses like we talked about in the first quick win, you could effectively reduce your waiting period to 3 months which would make your premiums a whole lot cheaper.
If you do have income protection, check what waiting period you have on your policy and then compare that with how much you have in your emergency fund.
If you don’t have a lot in there, go back to the first quick win and aim to build up your emergency fund.
If you have at least 3 months of expenses there, look into whether it’s appropriate for you and your needs to push out that waiting period and that will make your monthly premium considerably cheaper.
Quick Win #2.5: Money Left on the Table?
Another thing connected to income protection that a lot of people don’t know; a lot of income protection policies allow you to claim back the tax paid on the premiums. So, if you have an income protection benefit and you’ve never claimed back the tax on the premiums with your income tax return, reach out to somebody who is able to tell you whether you’re eligible and you might be able to backdate a whole lot of years' worth of premiums that you’ve paid and have a nice wee refund sitting there for you.
Quick Win #3: Make Banking Easy
Set up goal accounts. When you get paid, figure out how much you’re going to put into your goal accounts, whether that be travel, saving for a home, children’s education, electric car, or whatever it may be. Put aside that money every week, fortnight or month and do it in separate accounts. Structure your accounts separately so when you go to spend out of those goal accounts, you don’t feel guilty about it. Instead of just having a big savings pot, you’ve got specific accounts for specific goals, and you can clearly see the progress of reaching your goal!
If you are like most people and struggle with overspending, you can even go one step further and set up these goal accounts with a different bank. Set up a separate bank account with no debit card or phone access and accumulate your money without the temptation to spend! If the only way to get money out is by visiting the bank branch, you can save towards your goals faster and more effectively.