Let’s talk about financial awareness

National Financial Awareness Day on 14^th August serves as a great reminder to review your finances. While getting your finances in order might not seem like the most entertaining of summer activities, it really can have a positive impact on your financial wellbeing.

We’re giving you some actionable ways to manage your money and become more financially aware.

1. Get a better understanding of your income and spending habits

Being financially aware means getting to grips with where your money’s going each month, helping you to identify where you could be better managing your money.

Start by listing out all income and expenditure, potentially categorising your spending so you can more easily spot areas where you splash out the most.

Our guide on how to set and manage a budget could help you get started.

2. Talk about money

According to research from Standard Life, 42% of people don’t feel comfortable talking with friends and family about money. Yet opening up about your goals and money values can actually help to increase your financial satisfaction.

There are lots of reasons why you might find it helpful to talk to your loved ones about money, not least because the way they handle their finances might impact you if you have shared financial responsibilities. Plus, if you’re worried about money, you may be able to turn to your loved ones for support which can help you to feel more motivated and in control of your financial situation.

To kick-start a conversation about money, choose a comfortable, private environment. Remember that you don’t have to cover every aspect of your finances in one go, so start off by discussing a topic you’re both comfortable with – perhaps your financial goals or your favourite savings tips.

3. Choose a money-saving challenge

34% of UK adults have less than £1,000 in their savings accounts. If you’re one of them, though, don’t worry – it’s not too late to get saving.

Experts suggest that you should have at least 3 to 6 months’ worth of essential expenses saved up, so you’re better able to deal with unexpected situations or emergencies.

To help you get into the habit of saving, why not take on a fun money-saving challenge? You could even share a savings goal with your friends so you can support and encourage each other.

If you generally struggle to put money aside, you may find it helpful to automate the process by setting up a Direct Debit to transfer money from your current account to your savings account. Just make sure you always have enough money in your current account to pay for essentials and high priority debts.

4. Set your spending goals

You may want to renovate your kitchen, buy your dream car, book a family holiday or simply replenish your rainy day funds. To help you reach your goal, first work out how much it will cost and when you want to achieve it. You can then adjust your budget and set yourself savings goals to help you set aside the money you need. After all, you’re far more likely to start saving if you have a clear goal in mind.

In some cases, it may simply not be possible to save up enough within your ideal timeframe. Consider whether you want to delay your purchase or borrow the money to help you achieve your goal sooner. Do be aware that borrowing money will almost always cost you more in total, though, so do your research carefully.

We share further tips to help you decide whether to spend or save here.

5. Review your credit report

Your credit report provides a good overview of how you’ve managed debt in the past, and lenders often use this information to make a decision on credit applications.

It’s therefore a good idea to look after your credit report to ensure it’s up to date and free from any errors.

Thinking long-term, try to practice good money management. Not only will this support your financial wellbeing, but it could also put you in the best possible position if you wish to borrow money in the future.

For example, pay your debts on time, keep your credit card utilisation rate below 30%, and avoid applying for credit with several lenders within a short period of time.

6. Manage your debt

According to The Money Charity, UK households have debts of around £65,000 on average. From mortgages to unsecured debt such as personal loans or credit cards, debt is a natural part of many people’s lives – it’s how you manage it that matters.

Start by getting an overview of your debts, listing them out in order of priority. A ‘priority debt’ is a debt or bill that may have severe consequences if you don’t pay on time. These debts, such as your mortgage or rent payments, should be paid first.

Next, look at your secondary debts. There are a couple of common methods to help you manage these. Using the snowball method, you’d pay off smaller debts off first which helps build your motivation to pay off larger debts. The avalanche method focuses on paying off high-interest debts first, so you pay less interest over time.

Our debt management page offers additional information. And, if you’re worried about money, please talk to us as soon as possible or contact a free debt advice charity such as StepChange.

7. Look ahead

Financial awareness also involves thinking about your future financial wellbeing.

Whether retirement is just around the corner or many years’ away, it’s important to invest in a pension plan. Experts suggest your pension contributions should be equal to around 12.5% of your salary.

It’s also a good idea to review any life insurance or critical illness insurance policies each year to make sure they still adequately meet your needs. This will ensure ‘future you’ will be looked after.

Where to get further guidance

If you’re keen to get professional help to organise your finances, you may wish to consult a qualified financial advisor who can offer personalised support based on your own specific circumstances.

You may wish to do further research to learn more about managing your money too. There are a wealth of podcasts, books, videos and blogs out there – but do your research first to ensure the content is from a trustworthy source.

Here at Novuna Personal Finance, you’ll find plenty of tips from how to improve your financial literacy to how to improve your credit score. Or, if you’re looking for information about our loans, check out our comprehensive personal loans guide.