Getting tips and tricks on handling and managing your money can be great, but not everyone really knows what they’re talking about. Something that works for one person may not necessarily work for you. But how do you decide which money tips to take and which to leave? Trial and error could be a costly approach.
Luckily for you, we’ve brought together plenty of money tips to help you sort the money makers from the time wasters.
Five Money tips that are myths
You’ll often hear these ‘tips’ banded around with serious intent, and next time you do, feel free to say, “Errr, actually, that’s a myth, because…” and here’s why:
- You need to buy a house – renting may seem like you’re throwing your money away, but buying a house can be really expensive. The average cost of a house in the UK is currently at £231,185, which means that even if you only put down a 5% deposit, you’d need at least £11,559 in your savings. Buying a house isn’t the right move for everyone, especially if renting is considerably cheaper than mortgage repayments – plus, if anything goes wrong with the house, such as needing a new roof, you won’t be the one footing the bill.
- Investing is only for rich people – absolutely not, with robo-investing platforms, like Wealthify, investing can be done by anyone with amounts that you’d happily spend on a coffee! Back in the day you did need to have a healthy amount of cash behind you to get started, but thanks to technology that’s no longer the case.
- Credit cards are the same as an emergency fund – credit cards can be great when used correctly, but they are no substitute to an emergency fund. What happens if you lose your job or have a severe illness? If you can’t pay your credit card off then the debt is likely to rack up, you probably won’t be able to continue borrowing, and the interest will build up as well. It’s generally considered good practice to have an emergency fund to cover three to four months of your expenses, just in case you need it.
- I’m too young to think about retiring - when you’re young, retirement can seem like a lifetime away, but the reality is that the sooner you start paying into your pension the better off you could be. This is because you’ll have more time to benefit from compounding, which is when the profits from your investments start to make profits of their own when they’re reinvested, then these profits can make more profits and so on. For example, if you’re 25 and planned to retire at 65 and you started putting away £100 a month, you could retire with £141,372 in your pension pot.  But, if you leave saving into your pension until you’re 35, then £100 a month until you're 65 could net you £80,048 - £12,000 difference in what you saved, but over £60,000 difference in way you may get back. Moral of this tip? You’re never too young to start.
- I’m too old to start now – reading the last myth, we can understand why you may think this, but again, it’s not true. It doesn’t matter how old you are, anything you can put away for the future could help. The important thing here is that you start! Chances are, if this hasn’t been a part of your life for the last however many years, it will feel foreign, but the good news is that if you budget properly and shift your priorities towards the future, you may still be able to put a decent amount away for retirement.
Potentially good money tips
It may be hard to be able to tell the difference between a good tip and a bad one, some may sound obvious while others, which appear brilliant, may just be nonsense. Here are some of the best money tips that you may want to listen to:
- Start budgeting your money – if you don’t already, planning out a budget could be a great way to know exactly where your money is going each month. By doing this, you could weasel out any unnecessary spending and keep your outgoings in line with your income – it could help you to stop feeling as though you’re always living for your next pay cheque.
- Save first, spend later – this may not work for everyone, but the idea behind it is sound. Every time you get paid, try to put a certain amount of money into your savings. This way, you avoid the temptation of spending it and by doing it each month then you won’t miss it. Plus, it makes it a lot easier to know when you’ll hit your goals if you’ve got a set amount your contributing each month.
- Live below your means – even if you bring in a million pounds a month, if you’re spending two million a month then you’re unlikely to be in a good place financially. Living below your means doesn’t mean trying to spend as little as possible, it just means that you aren’t spending more than you earn each month.
- Regularly review your savings – Saving is important. In fact, most people will recommend you build an emergency fund in case the unexpected happens, but what they won’t say is that you shouldn’t keep it all in cash savings. This is because that, in the long run, you may not be able to buy as much with your money as you could due to inflation which makes prices go up. But by putting your money into investments instead, you could help to protect your money from inflation.
Potentially bad money tips
Honestly, how many times have you been told these tips below? They’re really common, but they may not be the best tips. Here’s why:
- Stop buying coffee/lunch – this seems to be a common one, that £4 cup of coffee or Tesco meal deal every day is costing you thousands a year. But not spending money here is unlikely to mean that you suddenly have thousands spare at the end of each month. In fact, without a budget you’ll probably just spend this money elsewhere.
- All debt is bad debt – this isn't always true, but it will depend on a number of things - such as the interest rate you're being charged, how long you're borrowing for, and the cost of repayments. Sometimes taking on debt can be a good thing, just make sure you're getting competitive rates and that your repayments don't become overwhelming.
- Don’t buy conveniences or treats – similar to the coffee, is when people tell you not to ‘treat yourself’ when you get your pay cheque. But if you budget properly then you could allow yourself money for a little treat each month. After all, what’s the point of earning money if you can’t enjoy it?
- Companies reward loyalty – don’t take this for granted, because while some companies may give you better deals or even reward you for loyalty, others are exploiting your loyalty to offer cheaper deals to new customers. This was so bad in the energy industry that the government put a price caps to stop companies overcharging customers who fall into their ‘default’ tariffs.
These are just examples of good and bad money tips, and if you want to take control of your finances, it’s important to know the difference and not listen to what everybody says. What's considered good or bad advise is largely dependent on your personal circumstances, so before doing anything with your money, it could be a good idea to research or talk to an independent financial advisor if you need to.
- This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £87,809. If markets perform better, your return could be £242,992. Values correct as of 10/07/2020
- This is the projected value for a Confident Plan (Medium Risk Plan). This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £56,419. If markets perform better, your return could be £122,123. Values correct as of 10/07/2020
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.