Top Financial Tips Everyone Should Know

Get the Basics Right

Understand your budget. Before you can start planning, you need to know how much money you have coming in and going out every month.
If you have a shortfall, you need to make more money or cut back on spending. If you have a surplus, you can start to put your money to work for you.
Check if you are entitled to any state benefits.
Set up monthly payments to cover any bills or debt repayments, as well as funding your savings and investments.
Use separate accounts for different purposes, for example, regular bills, spending, savings, and fun money. Always keep a joint account if you are married as this can make things easier in a worst case scenario.
Set some SMART goals – Specific, Measurable, Achievable, Relevant, Time-Bound.
Create a written financial plan to achieve financial independence. Review this at least once a year to check you are still on track.
Your plan should cover the Essentials (aim to allocate half of your income to this), the Future (20% of income) and Living for Today (the remaining 30%). Try to keep this balance even if your budget changes.
Don’t plan your life around your finances – plan your finances around your life.

Clear expensive consumer debt (credit cards and loans) as quickly as possible and avoid taking on more.
Aim to pay off your mortgage by your desired financial independence date. Overpay if you can (without incurring any redemption penalties).
Try to borrow only where this will enhance your financial plan, for example, to buy a property, further your education, or grow a business.
Check and monitor your credit score. Not only does this assess your eligibility for borrowing, but it can also alert you to potential fraud.
Seek help if you are struggling with debt.

Build an emergency fund of at least 6 months’ worth of expenditure.
Make sure this is held in an instant access account, separate from your regular spending (e.g., a specific monthly interest paying savings account like THIS).
Pay yourself first – set up a monthly standing order to fund your savings.
Consider term deposits for non-emergency savings as you could receive a higher interest rate. Alternatively, NS&I Premium Bonds offer the chance of a monthly prize.

Make sure you have life insurance to cover any debts or financial responsibilities.
You should also arrange critical illness cover and income protection to ensure ill-health doesn’t derail your financial plans.
Review your home, vehicle, and travel insurance to check they are fit for purpose and you have the best deal.
Consider private medical insurance for speedy medical treatment should you need it.

Make sure you are using all of the available income tax allowances.
Use your Capital Gains exemption when disposing of assets.
Consider splitting assets between spouses to make use of both sets of allowances and exemptions. Additional savings can be made if one spouse is within a lower tax band.
If you run a business, seek advice on the best way to structure the company and extract the profits, e.g. a combination of salary, dividends, pension contributions, and director’s loan repayments if applicable.
Consider funds which invest in smaller companies such as Venture Capital Trusts, Enterprise Investment Schemes, or specialist business relief investments. You can save on tax, but these investments are very high risk and there is a chance you may lose money. Advice is strongly recommended.

Determine your risk profile and review this annually.
Invest monthly to benefit from pound cost averaging and long-term compound growth.
Automate your contributions.
Invest in a diverse range of investments, across the spectrum of asset classes, sectors, and world regions.
Keep your discipline – avoid trying to time the market or making emotional investment decisions.

Make sure you join your workplace pension to benefit from tax relief and matched contributions.
You can also set up a personal pension if you don’t have a workplace scheme, or would like to diversify and make additional contributions.
Pay in as much as you can, making use of carry forward if applicable. Married couples should each have a pension to make the most of the available reliefs.
Check your State Pension early, as you can make voluntary contributions to top up your record if you have a shortfall.
Check your annual workplace and personal pension projections to make sure your retirement (and fund choices) is on track.
Review your existing pensions and consider moving them to a single provider for simplicity.

As well as contributing to your pension, make sure you use your ISA allowance (£20,000) every year for tax-free growth.
Once you have used your ISA allowance, consider a General Investment Account. While income and growth are not tax-free, you can use your tax allowances and capital gains exemption to offset a potential liability.
If you have a lump sum to invest, investment bonds (onshore or offshore) can be useful for tax planning, trusts, and inheritance tax mitigation.
Remember any new or existing trusts must be registered with the TRS.

Make a Will and review it regularly as your circumstances and wishes change.
Complete and register a Lasting Power of Attorney to ensure someone you trust can deal with your financial affairs and medical decisions if you are no longer able to.
Consider options to reduce Inheritance Tax (IHT), for example making gifts, setting up trusts, investing in assets which qualify for business relief, or setting up an insurance policy to cover the liability.

With the basics in hand, you can start to apply your new mindset to your daily life and improve your money habits.
Regularly cull your annual subscriptions and memberships to avoid wasting money on things you don’t use.
Review your insurance and service contracts regularly to make sure you have the best deals.
Check your borrowing rates and check if they can be improved. If you can’t repay credit cards in the short-term, look for a 0% offer to save on interest.
When buying something, ask yourself if you need it, if it brings you joy, and if you can find it cheaper elsewhere.
Use loyalty points and online discount codes to make your money go further. E.g. QuidCo and Nectar Points.
Get rid of anything you don’t need and consider selling unwanted items to make extra money.
Spend mindfully – focus on new experiences and achieving your goals, not accumulating more possessions.

Once you have taken control of your finances and built some good habits, planning for the future will become easy.

Please see the Tandem Financial Compass to find out more about the core areas of financial planning.