Let's face it: no one knows what the future holds. But being on solid financial ground gives you peace of mind and makes it easier to deal with the unexpected twists and turns life can throw your way. Even if your finances are already in a good place, it doesn't hurt to prepare yourself and protect the money you've worked hard to earn.
Just like carrying an umbrella with you on a winter's day just in case, we’re going to run you through the six things you can do to future-proof your money and set yourself up for financial success.
1. Stay on top of your spending
Budgeting may not be that exciting, and it can seem pretty overwhelming at first. But while it won’t be winning a popularity award anytime soon, there’s no denying that it’s good for you. Making a budget that you can actually stick to will stop you from overspending, making your life easier. You'll thank yourself later for prioritising the future by putting a bit of money away into your savings.
The key is to strike a balance. On the one hand, you’ll want to cut down on unnecessary expenses and be more mindful of how much you spend and on what. At the same time, you’ve got to be realistic and a bit flexible with it. It’s pointless to budget £50 a month for transport when you regularly spend more and couldn't realistically cut down without walking the 10 miles to work. Make sure you remember to enjoy yourself and set up a ‘fun fund’ for the odd treat here and there. It's also a good idea to set up a rainy day fund, while you're at it - there's nothing wrong with spoiling yourself when you're feeling down as long as you can afford to do so.
Once you’ve made your budget, make sure you take stock every so often. Reviewing your outgoings every year will help you take advantage of the best deals out there.
This is especially important for larger outgoings such as utilities, broadband, your mobile phone contract and even your mortgage.
If you’ve taken out a fixed-rate mortgage, when the fixed-rate period is up, you’ll be switched onto a standard variable rate. This can often be a higher rate, so it’s worth considering your options. You might find that switching to a new deal could save you money - check your offers here to find out.
Gas and electricity providers regularly bring out new deals, so you could switch provider or potentially move onto a new deal from your current one. With winter fast approaching, why not see how much you could save on your energy bills with ClearScore?
2. Use credit little and often
Whether you’re looking to get on the property ladder, start your own business or buy a new car, you may need to apply for credit at some point in your life.
If you’ve never bought anything on credit, then you might find it tricky to get your application approved. This is because lenders want to see evidence that you’ve handled credit responsibly before. If you have no prior history with credit, it can make things tricky.
That's why it's important to start building up a positive credit history now.
One way you could do this is by using a credit card. Making small purchases regularly, and - more importantly - always paying your statement on time, can help build up your credit score. Used responsibly, it shows lenders that you can handle debts well.
Establishing a really positive credit history now can improve your chances of getting that loan or mortgage in the future. It could even save you a lot of money, as you may be offered better terms with a higher credit score.
3. Stay on top of your debts
If you’re not careful, debt has a way of spiralling out of control. Stress and financial hardship aside, regularly missing payments can damage your credit score and harm your chances of getting more credit in the future.
Good budgeting goes a long way towards ensuring you don’t have more debt than you can handle. However, you also need to make sure you pay your bills on time. A good way to do this is to set up a direct debit for repayments. These take a few minutes to set up and automatically transfer the money to settle your bills without you having to remember.
If you’ve built up a lot of debt, focus on repaying those priority debts first. Not paying these can have serious consequences like home repossession or a court order. It’s generally a good idea to pay the most expensive debts first (the ones with the highest interest rates). You may also want to think about consolidating your debts if it will make them cheaper and easier to manage. You can do this by using a balance transfer card to make it easier to manage.
Here’s some more information on how to deal with debt.
4. Diversify your investment portfolio
Should the value of the stock market change, you'll want to make sure your portfolio is diversified. The reason for this is if you spread your investments over a range of areas, if one area suffers, your other investments should balance it out.
You might like to consider safer and steadier investment options if the market is likely to be volatile, at least in the short term. Check out this list of investments that can help to protect your long-term wealth.
5. Start saving for retirement
Retirement may seem like a long way away, but the sooner you start saving for it, the better off you’ll be.
If you’re in employment, your employer may have to automatically enrol you onto a personal pension plan. In this case, your contributions are regulated by law - if you're lucky, your company might match your contributions. If you’re self-employed or not entitled to a workplace pension, you’ll need to make separate arrangements.
In general, you should aim to save a percentage of your income every year that's equivalent to half your age. So if you’re 30, this means paying in 15% of your income over the year. This means your contributions should increase as you get older. Starting early will allow you to get away with smaller contributions, because you’re investing over a longer period. And the earlier you start investing, the more time your money has to grow (you'll be thankful for this when the time comes to withdraw your pension).
6. Check your credit report regularly
Last but not least, the information in your credit report can influence your ability to get credit, so it makes sense to keep an eye on it to make sure it’s the best it can be.
In particular, look out for any mistakes and fix them as soon as possible. You should also look out for any activity you don’t recognise, as this could potentially be a sign of fraud. If you spot something that doesn't look right, raise a dispute with Equifax as soon as possible to get it rectified.