1. Spend less than you earn
It makes sense if the money you bring in on a regular basis is more than the money going out (which is trickier said than done currently). This way you’re able to live within your means while having enough money set aside for your financial goals.
2. Build an emergency fund
Start to build up your contingent funds, often referred to as an ‘emergency fund’. This is a level of easily accessible cash in case something unexpected pops up. As a minimum, this should cover three months of your expenses. More than this really comes down to personal preference.
3. Invest your money
You can start to invest any money you’ve built up that isn’t forecast to be needed for the next five years. Knowing what the money will be used for will help you determine how you will invest. Is it for a trip of a lifetime? Is it to fund a wedding or honeymoon? Is it to build up money for a deposit or to achieve financial independence so that you can look forward to life after work, with life being on your own terms?
That will dictate whether products such as Individual Savings Account (ISA), Pension, Investment Account, or something else is most suitable to help you achieve your goals.
The important point is to get started. Compound interest is the eighth wonder of the world, according to Albert Einstein. So, the earlier you can start, the greater that snowball can grow and build up momentum.
4. Diversify your investments
Diversifying your investments – meaning ‘don’t put all your eggs in one basket,’ as they say. This is sage advice when it comes to your finances. With the current cost of living crisis, having different options at your disposal is always a good idea. Putting your money in different pots is also the simplest and easiest thing you can do to achieve long-term returns.