OK, so it’s not quite the Loch Ness monster or Roswell, but there are plenty of myths out there when it comes to managing your spending. And most of them are neither accurate nor helpful. Here’s the truth behind some of money’s mightiest misconceptions.
Having a budget absolutely doesn’t mean squirrelling all your money away and never enjoying yourself. In fact, rather than seeing it as being about sacrifice, try to think of a budget as putting you in control. There’ll always be certain essentials you have to spend on, like rent, a mortgage, groceries, etc. Plus, ideally, you should be saving for emergencies and the future. But budgeting for them each month means you also know exactly what you’ve got left to spend on other stuff. Which is where the fun begins!
Yes, Buy Now Pay Later plans are a great way to split the cost of things into more affordable chunks over a longer period of time. But at no point should you mistake paying later for not paying at all. Whenever you use Buy Now Pay Later to purchase something, make sure you have a clear plan for exactly how you will pay for it.
Whether it’s to cover your living expenses if you suddenly lose your income or to pay unexpected costs like fixing a broken boiler, building up an emergency fund is a really important part of managing your money no matter what age you are.Likewise, contributing to a pension plan can help set you up for an enjoyable and comfortable retirement. The earlier you start paying into it, the more your pension fund should have grown by the time you quit work.
Sure, we all know someone who loves a spreadsheet and gets all shouty about conditional formatting. But that’s not necessary. Set up separate pots in your online banking. Use a personal finance or money management app. Write it on a Post-It note on your mirror if you really want. As long as you’ve got an up-to-date record of your monthly income minus your regular outgoings and savings, you’ll know exactly how much you can spend on treating yourself. Which means you’re also on the way to budget mastery. Excel optional.
It’s certainly true that a bank or other mortgage provider will look into your credit history when deciding whether or not to give you a loan to buy a house or flat. But lots of other companies also use this system to decide if they should lend you money via payment plans, including mobile phone providers, car sellers and other retailers. Check out our article about what your credit score is and how to improve it for more information. But in a nutshell, if you pay your debts in full and on time, your credit score will remain in good health. If you don’t, well, the opposite is true.
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