How to future proof your finances

How to future proof your finances

How are you feeling about your finances? Even if you’re in a great place, these hacks will help you make the most of your paycheck.

Create – or double check – your budget. It’s difficult to understand your finances without one. Whether you use an app – we like Goodbudget, Mint, and Spendee – a spreadsheet, or a piece of paper, you need to know what’s entering and leaving your bank account each month. Use bank statements to get a solid estimate of what you’re spending on utilities, groceries, and other expenses. Itemize everything, including savings contributions, debt repayments, and discretionary spending.

The rule is simple, says Santis O’Garro, financial expert and author of The Money Mentor: If you’re spending more than what’s coming in, you need to cut back. “You’re trying to get away from being on a payday-to-payday budget.”

Review recurring spends. Subscriptions and memberships are an easy place to look for savings. If you’re rarely using a software or service, you can probably live without it. Check your bank and credit card statements to ensure you’re not forgetting digital media subscriptions and other charges that are too easy to set and forget.

Follow up on regular expenses. It’s sometimes surprising how much you can save by chasing utilities providers for their best rates. Implying you’ll sign with another company often inspires customer service agents to dangle better deals. So while it’s easier to ignore those direct debits, a quick phone call could bring some serious discount action. While you’re at it, visit comparison websites to find the best offers for car insurance, broadband, and mobile phone contracts.

Get serious about debt. If you’re in debt, ensure you’re meeting minimum monthly payments first, then work your way through by paying off the debt with the highest interest rate first and working through to the lowest. If you’re holding a number of debts, consider consolidating them with a lower interest loan to pay them off. And debt isn’t an excuse not to save. Most experts recommend paying down significant debt while making small contributions to a savings account. After you've paid off your debt, you can really build your savings by contributing that repayment amount toward your emergency fund.

Build emergency savings. Most experts agree that you should work towards having 3 to 6 months of living expenses set aside. “A lot of people don’t take this seriously,” says O’Garro. “But having an emergency fund is critical to getting out of a paycheck-to-paycheck cycle and keeping yourself out of debt if something goes wrong.” She suggests setting aside a small amount of money on a monthly or weekly basis – depending on how often you’re paid – and allowing it to build. When something unexpected happens and you pull money from the account, prioritize rebuilding it.

Photo by Ibrahim Boran on Unsplash

Get after life insurance. If you’re married, have kids, live with a partner or have any other dependents, it’s important to make sure they’re looked after if something happens to you. Life insurance will help your loved ones with bills and other costs. If you already have life insurance, be sure to review it regularly and update the details if your family situation or income changes.

Make a will. Even if you’re two months out of university, it’s a good idea to have a plan in place. It’s an uncomfortable but necessary conversation to have, and it’s typically best to speak to a professional.

Prioritize your retirement savings. If your budget is tight, it’s tempting to tell yourself you can’t afford to set aside money for old age. But really, you can't afford not to. Even a small monthly contribution is impactful over the long run. If your employer contributes to your savings, ensure you’re contributing to their maximum match. “You’re paying rent to your future and your dreams,” says O’Garro, the finance expert. As your salary increases, don’t forget to increase your savings contributions.

Don’t try to keep up with others. O’Garro calls “keeping up with the Joneses” one of the worst money habits and a behavior that set her into debt early in her life. “I was thinking that I had to be the same as everybody else. Or you have this so I needed that,” she said. “I think that’s really sad in society right now, to be honest with you. We’re so unique and so beautiful in our uniqueness and we’re trying to be like everybody else. The cool thing is that person that walks in with the top that you can't get because they got it in a charity.

“So I don't keep up with anybody. I keep up with myself. I don't use money as a way of validating myself in any area of my life. Personally, I think that’s a scary road to go down and I’ll never do that again,” she added.

Another reason measuring against others is unrealistic? “The Joneses could be broke,” says O’Garro. “If you’re dripping with jewels, that does not mean you actually have money in the bank.”

Building financially savvy can take time, but it’s well within your reach with these hacks. Good luck!