Key takeaways
How having open and honest conversations about money can improve your financial wellbeing.
- Tips for managing debt and repayments to help ensure you can access more competitive rates of credit when required.
- In our busy lives, it’s easy to lose sight of our financial wellbeing, but taking steps to protect your finances is important for long-term financial security and peace of mind.
Here, we’ll discuss three moves that can help you secure your financial future and manage any unexpected events more easily.
1. Talk openly about your finances
A strong financial future begins with open and honest conversations about money matters. This includes discussing financial goals, spending habits, and investment options with your partner. Also, if you have children, involving them in conversations about money can provide valuable lessons that will benefit them as an adult.
- The power of joint financial planning – Joint financial planning is more than just discussing household expenses; it’s about working out your financial goals and priorities. Sit down with your partner regularly to review your financial situation, set realistic goals, and track your progress. This approach will help ensure that you are both on the same page and share the responsibility.
- Teach your children financial literacy – Children often get their financial habits from their parents, whether good or bad. Speaking with children about money from an early age can help teach them how to be responsible with money. Discuss the basics of budgeting, saving, and holding off until they can afford to buy the things they want. As they grow older, gradually involve them in financial decisions, such as managing their pocket money or saving for something they want, such as a new outfit or a school trip.
- Tackling financial challenges together – Life is unpredictable, and financial challenges can arise unexpectedly. Whether it’s a job loss, a medical emergency, or a major expense, facing those challenges as a team can make them easier to manage. Being open with each other allows you to deal with problems quickly, explore solutions together, and change your plans if necessary.
2. Steer clear of the debt trap
One of the main threats to financial security is falling into a debt trap. High-interest debt can quickly spiral out of control, leading to a cycle of financial stress that can be hard to break free from. To protect your finances, be disciplined when it comes to borrowing and managing existing debts.
- Responsible credit card usage – Credit cards can be useful tools, but mismanagement of them can lead to a mountain of debt. Use credit cards wisely by paying off the full balance each month, avoiding unnecessary purchases, and understanding the terms and conditions of your cards. Always prioritise essential expenses and consider cash or debit options for everyday transactions to prevent accumulating high-interest debt.
- Create a budget and stick to it – A budget is a powerful tool for preventing overspending and staying on track with your financial goals. Outline your monthly income, divide your expenses into categories, and set funds aside for savings and debt repayment. Regularly review your budget to find areas for improvement and ensure that you are making progress toward your financial targets. Check out our article on how to create a budgeting plan.
- Emergency fund: Your shield against debt – Life is full of unexpected twists and turns, and having an emergency fund can be a financial lifesaver. Aim to set aside up to six months’ worth of living expenses in a separate savings account. This fund can provide a safety net during challenging times and remove the need to rely on credit cards or loans when unexpected expenses arise.
3. Stay current on payments and plan for the unexpected
Good organisation is the key to avoiding financial pitfalls. This involves keeping up to date on payments, being aware of home and vehicle maintenance costs, and having emergency funds in place for unexpected expenses.
- On-time payments and budget tracking – Late payments can lead to more fees, higher interest rates, and a poor credit score. Set up automatic payments for regular bills, such as a mortgage or rent, utility bills, and insurance premiums. Track your spending to spot any errors or areas for improvement in your budget.
- Home and vehicle maintenance: Plan ahead – Owning a home or vehicle comes with ongoing costs. Plan regular maintenance checks to catch any issues before they become costly repairs. Include these expenses into your budget, as this will help you avoid being caught short by unexpected repair bills.
Summary
Protecting your finances can be achieved through good planning, open communication, and good financial habits. By regularly discussing money matters with your partner and children, avoiding the debt trap, and staying current on payments whilst planning for the unexpected, you can give yourself a more secure financial future.
The information in this article is current as at April 2024 and may be subject to change. The information in this article is factual in nature only and does not and is not intended to imply any recommendation or opinion about a financial product. You should obtain appropriate advice before making any decisions based on the information in this article.
