## Future You Will Thank You: 5 Simple Money Moves for a Brighter Financial Future
Living in the moment is easy, especially when it comes to finances. The current cost-of-living crisis makes it challenging enough to pay today’s bills, let alone think about what ‘future you’ might need. But making a few simple tweaks to your money management now can lead to a far more prosperous future, both in the next few years and in your retirement.
These steps will have minimal impact on your current lifestyle but a big impact later. Future you will thank you for taking the following actions:
### 1. Conquer Your Debt
If you have any form of debt except student loans or a mortgage, tackling it quickly will significantly contribute to your financial resilience. Missing payments can negatively affect your credit rating, making it harder to secure a home or car loan in the future.
“Debt can get expensive, so it makes sense to address it first,” says Claire Dwyer, head of investment companies at Fidelity. “Credit cards and personal loans often come with high interest rates, which can really cost you in the long run.”
The key is to prioritize the highest interest-rate debt first, which is usually a credit card if you’re not paying it off in full each month. Consider these strategies:
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Direct Debit for Debt Clearance:
If you can afford it, set up a direct debit that clears your entire credit card balance each month. This way, you avoid paying unnecessary interest.*
Targeted Payment Plan:
If full payment isn’t feasible, determine how much you can contribute each month and set your direct debit accordingly, paying more than the minimum to expedite debt repayment.*
Zero-Interest Balance Transfer:
If you have a good credit rating, consider transferring your credit card balance to a zero-percent balance transfer card. Several options are available that offer a year of interest-free repayment and no transfer fees, like those offered by Santander and Royal Bank of Scotland. Remember to make consistent monthly payments and the minimum payment to avoid accruing interest.*
Accelerated Personal Loan Repayment:
Check if there are any penalties for paying off your personal loan faster. If not, use any available funds to clear this debt and enhance your future financial stability.*
Seek Professional Help:
Don’t hesitate to reach out for help if you’re struggling. Organizations like StepChange (0800 138 1111) offer free debt advice and guidance to help you regain control of your finances.### 2. Automate an Emergency Fund
Recent data indicates that rainy-day funds have been depleted by the cost-of-living crisis, leaving individuals vulnerable to unexpected expenses like car repairs or boiler breakdowns. Experts recommend an emergency fund covering three months of readily accessible expenses, but even a few hundred pounds can make a significant difference. Here’s how to build an emergency fund effortlessly:
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Round-Up Savings:
If your bank offers the option, round up your spending to the nearest pound and deposit the difference into a savings account. It’s a painless way to accumulate savings.*
Regular Saver Accounts:
These accounts allow you to save a fixed amount each month and earn competitive interest rates. First Direct offers 7% interest on £300 monthly deposits, while Nationwide provides 6.5% fixed interest for a year on £250 monthly deposits. Set up an automatic payment on payday to ensure consistent contributions.*
AI-Powered Autosaving Apps:
Apps like Plum or Chip use AI technology to analyze your income and spending patterns, automatically transferring funds to your savings account. Chip charges 45p per automatic save unless you subscribe to its £5.99 monthly plan, while Plum offers basic autosaving for free.### 3. Maximize Your Retirement Savings
Saving for retirement is a long-term investment in your future. Starting early gives your money time to grow significantly. The good news is you’re not alone in this journey, as the government and your employer can help build your pension pot.
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Workplace Pension Enrollment:
Enroll in any workplace pension scheme you’re eligible for. Consider increasing your contributions beyond the minimum, as some employers may match higher contributions. You’ll also benefit from tax relief on pension contributions.*
Salary Sacrifice Schemes:
Inquire about your employer’s salary sacrifice schemes. These allow you to contribute to your pension before national insurance deductions, further enhancing your retirement savings.Jonathan Watts-Lay, from workplace pension specialists Wealth at Work, highlights the impact of even small increases in contributions: “A one percent increase in your pension payments in your 20s could increase your final pension pot by 25% if your employer matches your contribution. For someone earning £20,000 per year, this could increase their pension pot from £99,341 to £124,177.”
### 4. Invest Without Noticing
Investing is a long-term game, and historical data shows that investing in stocks and shares generally outperforms cash savings over extended periods. Future you could benefit from above-inflation returns by starting early.
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Stocks and Shares ISAs:
Set up a stocks and shares ISA and make regular monthly contributions. Robo-advisers like Nutmeg, Wealthify, and Moneyfarm use questionnaires to assess your risk tolerance and automatically invest your money in a suitable portfolio. Wealthify requires a minimum investment of £1, while Nutmeg and Moneyfarm require £500 to get started.### 5. Consider Protection
While no one wants to contemplate the worst-case scenarios, investing in protection for yourself and your family is crucial. Life insurance or critical illness cover may not be necessary for everyone, but if you have dependents or significant debts like a mortgage, it can provide financial resilience in difficult times.
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Life Insurance and Critical Illness Cover:
These policies can offer a lump sum payment or continued income if you become unable to work or are diagnosed with a serious illness, ensuring your family’s financial stability.Recent figures from DIY investment group Hargreaves Lansdown revealed that only a quarter of families with children have sufficient life cover to protect their loved ones. Sarah Coles, head of personal finance, emphasizes the importance of considering your family’s needs: “We need to assess the support our family would need if something were to happen to us and ensure we have adequate savings and insurance in place. If covering everything is financially burdensome, prioritize, but don’t overlook life insurance. Your family would be lost without you in many ways, and insurance ensures their financial survival.”
Navigating life insurance and critical illness cover can be complex. Consult a financial advisor (find independent advisors at unbiased.co.uk) or use a website like Life Search for information on different types of coverage.
By taking these simple steps today, you can secure a more prosperous future for yourself and your loved ones. Remember, future you will thank you for taking proactive steps towards a brighter financial future.
