This is actually from an email I sent one of my friends and colleagues.  It’s a good starting point, and I think simple enough that it was useful.  He thought so anyway.  Feel free to send it to your friends and family, and comment with ways it can be improved if you wish.  I’ll be happy to update it.

1 – BASICS

Look at your bank statement from the last month and list all your direct debits/standing orders.

·         This shouldn’t take long.  All you have to do is get to know what you’re actually paying for.

2 – PROGRESS

·         Check out those direct debits and cancel the ones you don’t want or need.  For example magazine subscriptions are a waste of time and money.

·         Look at the ones that are left and see where you can save money.  You can save on TV, Utilities (Energy/Broadband/mobile phones/etc.), Insurances.  I do this every year and it doesn’t take long. 

·         Once you know what you’re spending on you should be able to see where you can save money.  Think long term – saving £100 a month is going to make a big difference.

3 – SET A BUDGET

·         Once you have a handle on what you’re spending your money on, it’s worth going towards the future with a budget in mind.  You don’t have to be crazy about this, or super strict.  Because you’ve looked at the waste and want to save for the future this should be pretty easy to do. 

o  Consider all big purchases for a short time rather than impulse buy

o   Only go to the supermarket once a week, or order online from Ocado or Tesco. (you might have to plan lunches and dinners a bit more, but this saves a fortune, and reduces waste.)

4 – PROTECTING YOURSELF

Join Money Saving Expert Credit Club.

·         Make sure your details are correct, such as your addresses etc.

·         Check for any old unused bank accounts and close them.

·         It’s important to make sure that everything’s correct and you don’t owe random money.

5 – CLEARING DEBT

Look at all your debts and see which ones you can pay off and how quickly.  Any loans/credit cards should be cleared ASAP.  It’s also worth overpaying your mortgage a bit, if your mortgage company allows it, to reduce how long you’re paying it. Mortgage Overpayment Calculator.  The sooner your debts are gone the sooner you can save some serious wedge.  Plus it cuts down on stress.

6 – ACCUMULATING WEALTH

Open an ISA with Vanguard

·         Set up a direct debit to come out on the 1st of every month.  As much as you can easily afford every month.  You can invest up to £20k each every year. 

·         ISAs are money that you can get out whenever you want, so it’s a good idea for saving for a future.  It’s best if you leave it there as long as you can, but if you do need something like a new car or extension (never again?!) then you could use this money rather than borrowing it.

7 – KIDS

Open Junior ISAs with Vanguard for each of the kids.  You can do this on the same account as yours.

·         You can pay up to £4620 per child per year into this.  That’s £355 a month each.  This should be your lowest priority, as you should sort out your own stuff first.

·         However – I would recommend putting at least £50 a month per kid into this.  If they put this into a pension when they reach 18 it will be worth a fortune by the time they retire. 

o   Having £15000 in a pension and leaving it for 40 years should result in a pension fund of about £800k due to compounding interest.  You don’t really need to know how it works- just that it does.

8 – PLANNING FOR YOUR RETIREMENT

Time to think about your pension.

·         A company pension is fine, but personally I have set up a private one as I know the costs involved and it gives me more control. 

·         Benefit of Pensions – when you pay into it they automatically give you the basic rate of tax back.  I.e. if you put in £100 of your own money they will add £20, so you end up with £120 in your account.  You will also have to speak to the tax office and tell them what you are planning to pay in, and they will give you the extra 20% for a higher rate tax payer, and add it to your tax allowance.  Therefore, very £100 you put in actually means £140!   Don’t worry about mucking this up.  The tax office people are really nice and helpful, and it’s easier than it sounds.

·         This is money that you cannot access until you’re 60, so whilst you should put as much as possible in (due to the tax benefits), you have to bear that in mind. 

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