‘Level up’ your finances in 2022 with three simple steps – ‘money saving mode!’

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This new year a top task for many people is to reevaluate their attitude and relationship with money, but it is difficult to know where to begin. Fortunately, one expert has made a suggestion on how to level up one’s financial status, and the answer may lie surprisingly in video games. Rob Gardner, Director of Investment at St James’ Place Wealth Management, has said the best way to think about approaching one’s finances is like playing a video game.

There are different levels and people should aim to complete each level before moving on to the next.

He exclusively told Express.co.uk that too often, people are focused on bigger goals, when they haven’t set themselves up with the basics, and it is important to walk before one can run. 

The first step is Level One, the point at which person has lots of debt and no emergency cash fund.

The most important course of action is to clear any credits cards and store cards, as these can often be the worst culprits for debt mounting up quickly.

Those who are earning and able to pay more than the bare minimum monthly payments should do so, looking to get rid of high interest options first.

However, those with no income and debts mounting might need to take a more drastic course of action.

Mr Gardner advised individuals to reach out to the companies concerned to explain one is in financial difficulties, and help may be at hand such as a payment holiday.

Other assistance is made available  through debt charities and organisations such as StepChange which offers useful resources to help people with their debt free of charge.

Once this is accomplished, and debts are paid off, then a person can move on to Level Two, which is creating an emergency cash fund.

Mr Gardner explained: “Everyone’s emergency cash fund will be different, but based on everything we have learned since the pandemic, a minimum of three to six months’ worth of your critical outgoings would be the most sensible.

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“Think about your money like you do your smartphone battery: We know exactly what to do when we hit that low battery moment – we shut down the energy draining apps and go into power saving mode.

“Some of us might have a spare battery pack we can use to charge it up again. This is your emergency fund and the ultimate goal here – to have cash set aside to make sure you’re never completely out of juice.

“Without an emergency fund, you’ll need to put yourself into ‘money saving mode’ each time until you can save enough to create this buffer.”

People can start by analysing how much they spend, identifying areas where they could cut back – for example, in an unused subscription or membership.

Small sacrifices now can help Britons in the long-run as building up an emergency fund may help with unexpected bills or a financial emergency later down the line.

Individuals should be aware, however, they will need to continuously top up this pot again, returning to “money saving mode” until they have repaid what they have used. 

The final move is Level Three, for those who have no debt and who have established an emergency fund – the “financially resilient”.

Now, Britons can think about their long-term goals and how to achieve them, with Mr Gardner pointing towards investment. 

Individuals who have decided to invest should start with the questions: What do you want to do and when do you want to do it?

The answers to these, the expert said, will determine how much risk a person wishes to take on and the time period for their investments.

Very long term investments include pensions and the stock market, as people need to ride the fluctuations to get the best outcome.

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But Mr Gardner also suggested looking into ISAs and the Lifetime ISA which could help with returns. 

He concluded: “Taking the steps to progress up through the levels will give you the confidence to be comfortable with this, as the money invested isn’t needed in the near future to pay off debts, bail you out of emergencies, or even go towards your shorter-term life goals.

“Being confident and comfortable are two objectives you should set yourself during this level, with the final piece of advice to become more comfortable talking about money with others.

“We don’t talk enough about money as it’s considered taboo, but there’s a lot of knowledge out there which could help you with your planning and decision making.

“This could be from a professional, or some of your friends and family, so ask around and get regular help from people who know more about money than you, and who are on your side.”

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