How To Get Better With Money In 2023
Many Millennials struggle with money because they are financially illiterate. They don’t save, understand compound interest, or accumulate wealth through assets.
This has had a devastating impact on their ability to build wealth. In order to close the financial literacy gap, it is essential that we provide more education on personal finance.
We need to have the knowledge and tools they to make smart financial decisions.
A high rate of inflation and a base interest rate of 3% in the UK are driving an increased cost of living nationwide.
This can make it hard to grow your money this year.
Let’s look at things you can do …
Importance of understanding personal finance
Taking proactive steps to understand and manage your finances can lead to incremental gains, through the reduction of expenditure and the maximisation of your monthly (or weekly) disposable income.
Better knowledge about money leads to financial stability and wealth.
How to improve your personal finances
Below are some ideas:
1. Make use of tax-free savings and investing
In the UK, you can earn tax-free interest on up to £20,000 in savings by using ISAs (Individual Savings Account). There are different types of ISAs (cash ISAs, Lifetime ISAs, and Stocks and Shares ISAs)
Unlike investments and standard savings accounts, where you have to pay tax on your savings interest, putting money into ISA accounts is completely tax-free for up to £20,000 per year.
Types of ISA accounts:
Cash ISAs – these are usually offered by banks and building societies, and they can only hold cash investments. The interest rate you get will be guaranteed and set by your Cash ISA provider. There are two types of interest rates: fixed rates, and variable rates.
Lifetime ISAs (LISA) – if you are saving for your first house purchase, then look into LISA, as HMRC will add 25% free to your contributions.
Stocks and Shares ISAs – these allow you to invest in the stock market. This gives you access to greater potential investment growth and investment income, but your investments will be at risk of losing money.
2. Move your savings to a better savings account
Recent hikes in the Bank of England’s interest rate have helped boost the savings market, but there is a huge gap between the best and worst rates.
The best instant-access accounts pay around 2.85% AER yet some of the big high-street banks are still paying rates as low as 0.2%. Moving £10,000 from one of the worst accounts to the current market leader could net you an extra £269 a year.
3. Seek out financial advice
Whether you need advice on saving, pension, debt, investing, or your tax affairs, it’s best to speak to a qualified professoonal financial advisor.
The advice can be tailored to suit your precise financial circumstances and future objectives. Not many people know it, but if you ever suffer financial loss due to poor or misleading advice from a financial advisor, you may be able to bring a financial negligence claim and pursue fiscal compensation as a result.
4. Spend some time brushing up on your tax affairs.
If you’re self-employed, you’ll pay tax on your profits (income – after running costs – above the personal allowance), so don’t forget to check and log any allowable expenses: it means less tax to pay.
Legit expenses include computer kit, stationery, advertising, some travel and home-use costs, and even your internet and phone use.
If you’re employed, it’s also worth looking into tax allowances, which shield some of your income from the tax office: we’re talking savings allowances, being married, etc.
5. Haggle or switch utility providers
If you’re happy with your existing provider, it’s worth negotiating lower rates. Make sure to get quotes from their competitors first as it gives you good leverage in negotiations.
Use comparison sites to find the best deal.
6. Changing employers can add up to 20K to your yearly income
Maybe in your 20s, you stayed in a dead-end job for too long because you were told it would look good on your résumé to stay in one place for many years.
Now that you’re in your 30s, you’ve been able to grow your skills and your salary so much faster by changing jobs more frequently 😉