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Whether you have debts to wipe or simply want to make more of your money, here’s how to sort out the basics.


Tackle debts

Whether you’ve little debt or it’s in danger of spiralling out of control, there are ways to get back on track. Work out what you owe and to which provider. Then consider which debt is the most urgent to pay off – typically, this is the most expensive debt, at the highest interest rate.

If you’ve credit card debt, increase your monthly repayments to wipe your balance at a faster pace. You could switch to a card offering 0% on balance transfers for a period, making payments without racking up further interest. But check balance-transfer fees as some cards levy these at around 2.5% of the outstanding debt.

Don’t forget your mortgage. You can typically overpay by up to 10% a year on a standard mortgage without facing penalties. While savings rates are rock bottom, it’s worth piling cash into reducing this liability. That’s if you don’t have more urgent debts to tackle first.

For more debt related tips read our guide to managing debt by Rebecca O’Connor 



Draw up a budget showing your income and outgoings. A quick online search will find various tools you can use to help – but all you really need is a simple spreadsheet. Scan previous bank statements to see where your money goes. This will help flag what’s essential and what isn’t.

Vital outgoings include your rent or mortgage, and household bills such as gas and water, car and home insurance. Once you know how much you spend each month on these, you can look at the extras and see where costs can be cut.

There are masses of ways to put more cash back in your pocket. Save up to £670* per year by cutting back on your weekday takeaway coffees, quit smoking and save almost £500** per year or make your own lunch every day and save over £1700 per year***. In the long run, a few small changes can save you a fortune. 


Build rainy day funds

Once you’re debt-free, try to squirrel away enough cash to cover six months’ worth of bills. With any luck you’ll never need to dive into this fund, but it’s a great financial habit to get into.

You can pick from a range of easy access and fixed-rate savings accounts for spare cash. Check out comparison tables and for the best rates. Fixed-rate accounts offer some of the best returns on the market, but only if you lock away your cash for a specific timeframe. For an emergency fund, this isn’t ideal.

Some banks offer regular savings accounts with interest rates as high as 6%. You’ll probably have to open a current account with the bank, and there are caps on the sum you can save.

You only pay tax on savings if you’re a basic-rate taxpayer earning more than £1,000 interest a year, and higher-rate taxpayers earning more than £500. This follows the introduction of the personal savings allowance (PSA) in April 2016. 


Set your goals

Goal setting is about what you want out of life, and dealing with life changes. This could be a career change, retraining, getting married and starting a family, or moving abroad. All have financial implications.

Consider short, medium and long-term goals. Then add the expected cost, target date and how much you need to set aside each month.

Perhaps you’ve a boiler that needs fixing, or a holiday to pay for. Or you might want a new car. Medium-term goals include saving for a house deposit, or school fees. Paying off your mortgage or saving for retirement can be included among the longest-term goals that often take 10 years or more to achieve. 


Fund your pension 

If you’re employed, join the company pension scheme. You’ll benefit from employer contributions on top of your own – and turning these down is effectively refusing a pay rise. For anyone who’s self-employed, there are personal pensions enabling you to pick your own funds.

Anyone under 40 could opt for a lifetime ISA from April 2017, if you’ve limited funds to set aside each year. You save up to £4,000 each year, with the government providing a 25% bonus on these contributions at the end of the tax year. If you put in the maximum, you receive a £1,000 bonus every 12 months. This is equivalent to a 25% interest rate on your savings. After you turn 60, you can take out all the savings tax-free.


Spread your search for returns

For longer-term savings, you may want to diversify and dip into the stock market. This gives the potential for greater gains over the long term. There are ways to reduce the risk, if you’re a nervous or first time investor.

You could pick from a range of equity income funds, spreading risk among a large pool of companies. These pay a dividend, or a slice of profits that often amounts to 4% or more, which can be reinvested.

But be very clear with yourself about how much risk you’re willing to take with your money.


Consider protection

Once you’ve got your finances on track, you want to protect yourself and your family for any unforeseen events. These may include an illness or disability that prevents you from working, or death.

Insurance is particularly important if you’ve a family to consider. Life insurance is most commonly taken out by the breadwinner to provide a lump sum should he or she die.

Check what benefits are available from your employer. If you’re self-employed, income protection insurance may be worth buying. This meets your outgoings if you are unable to work, covering your loan, credit card or mortgage payments for 12 months.


*based on average UK cigarette price of £9.40 per pack of 20 cigarettes:

**based on average price for medium coffee at £2.57 five days per week.

*** based on UK average daily spend of £6.67 on eating lunch out 


What is Money Means?

Money Means is a news and information series written by independent financial and consumer journalists and experts. FSCS launched Money Means in 2016 to help give people clear and useful information about personal finance, to increase their understanding and confidence when dealing with money. .

9/8/2017 2:31:47 PM