Personal planner: Time to take stock before the summer break

With the temperature slowly but surely creeping up along with the humidity, summer is fast approaching. Now is a good time to take stock of where you are and what goals you have achieved so far over the year.

Many of us will have set different New Year’s resolutions, but now that January seems like a distant memory, how are you doing with those goals, and specifically the financial ones? Here are a few pointers to make sure that the second half of the year is as successful as possible.

Keep a spending diary

Before you start sorting out your finances you need to know where all your money is going.

If you never have any spare cash to save at the end of the month then you are more than likely frittering away money absent-mindedly. It’s surprising just how much the small purchases add up.

By keeping a spending diary, even for a month, you can see what unnecessary expenses you are spending your money on. 

Set a budget

When you figure out where all your money goes by keeping a spending diary the next step is then to create a budget. Cutting out unnecessary expenses does not mean living like a hermit, it just has to be a realistic budget. 

Repay your debt

There is no point building up a pot of money that accrues little interest when you have debts that charge you more in interest.

By keeping to a budget and working out where your money is going you should have more money to pay off your debt. Start with your most expensive borrowings first, such as credit cards. 

Insure yourself

Insuring yourself and your salary is a good way of making sure that your family are protected should anything happen to you.

There are three main types of cover: life assurance, straight forward in that it covers you if you die, critical illness which pays out if you become ill and income protection, which replaces income if you unable to work through ill health.

You and your wages are your most important assets, don’t forget this and make sure you are insured against death or ill health. 

Start a pension or increase your contributions

If you haven’t started saving for old age then you need to start now. The earlier you start saving the better thanks to the power of compound interest; in fact someone who starts saving at the age of 20 will have around 50% more in their pension when they retire than someone who starts saving exactly the same each month from the age of 30. 

Build an emergency fund

Saving for your future is important but so is making sure you have a pot of money to dip into should the worst happen, whether that’s a damaged car or broken down air conditioning. The reason many people get into debt is because they do not have any savings to start with. Ideally you should have an emergency fund of between three and six months expenditure. 

Invest

Bank savings rates are low and are expected to remain that way so the only way to make money, as long as you don’t need short-term access to your cash, is to invest in the stock market.

The stock market has historically given much better long term returns that deposit accounts and with savings rates at historic lows consider becoming an investor rather than a saver.

The writer is Regional Director at Acuma Independent Financial Advice