It can be a challenge if you live a hand-to-mouth existence where you struggle to survive from one payday to the next. The thought of smart financial planning seems more what people with big incomes do rather than those who are living close to, or on, the breadline.

In truth, much of what applies to those on a big salary applies equally to those who are on minimum wage as good financial health does not relate solely to how much money you have in your bank or savings account. No. In fact, good financial health relates simply to your ability to meet your financial obligations without getting into serious, unmanageable debt.

While there is never a bad time to learn about financial planning, the younger you are when you become interested in the importance of being ‘smart’ where money is concerned, the more likely it will be that you will have fewer worries about money than most. So, where is the best place to begin?

  1. Understanding the jargon 

There are countless millions of pages on the topic of finance on the web – type in ‘financial advice’ in Google’s search engine and you will get 1.2 billion results – that, in itself, speaks volumes to the importance of finance in our lives. The point we are getting at here is that with so much information available, to make the most of it you have to know and understand what is being discussed. For example, do you know the difference between ‘compound interest’ and ‘APR’? Do you know what an ISA is? Do you know what an AFS is? eFinancialModels have produced a handy explainer for many of these terms.

  1. Budget effectively

In the very simplest of terms, an effective budget is one where once you have met all your monthly financial obligations – rent/mortgage, cost of utilities, food, loan repayments, etc. However, when it comes to creating an environment of good financial health, budgeting goes a lot further than meeting your financial requirements on a daily, weekly or monthly basis. Budgeting also involves financial planning for future events, whether planned or unexpected.

For example, good financial health means having what are often referred to as ‘rainy day’ savings. A ‘rainy day’ is a term used to describe a day when things go badly for you and, where finance is concerned, that rainy day could include a washing machine breaking down, the car failing its MOT, a larger-than-anticipated bill for your mobile phone, or whatever. For some of us, an unexpected demand for money can be a nuisance; for others it can be a financial catastrophe.

It is almost a Catch 22 situation as those most likely to be hugely affected by an unexpected demand for money are those of you who are on a very low income and therefore putting money away for that ‘rainy day’ is next to impossible and may require further sacrifices in your standard of living. However, one of the upsides of good financial planning is peace of mind. In other words, you don’t live in fear of not being able to pay a bill.

  1. Limit your borrowing     

Normally speaking, the two costliest purchases we make during our life are a house and a car. Where a house is concerned, that makes perfect financial sense as we all have to live somewhere and if you are in a position where you can make the mortgage repayments rather than just pay rent, it makes sound financial sense as, after 25 years, or perhaps less, you will have paid off the mortgage and will be able to live ‘rent free’ for the rest of your life.

It may be that for work, or for the safety of your family, you need a car or SUV that will require a loan to be taken out. This is where you need to be smart, as many car dealers make more money from financing a purchase than they do from selling the vehicle. It always pays to shop around as you don’t have to take a loan from the dealer to buy a car.

One of the next major expenses, especially if you have a large family, is the annual holiday. Now this is an area where many of us make a very easy mistake, and it is one which is facilitated by what is often referred to as ‘purchase protection’. If you book and pay for your holiday by cheque and in between paying for your holiday and actually going on holiday, the travel company goes bust, you won’t get any of your money back, or if you do, it will be pennies, and many years later. However, if you book and pay for your holiday with a credit card (not a debit card), you automatically get buyer protection such that if the travel company goes bust, the credit card company will fully reimburse you.

Can you see what the result of this can be? Yes, we pay for our holiday using our credit card and then pay off the credit card over the next year, then repeat the process. Many of us don’t pay for the holiday on a credit card and then pay off the full balance within the next month. And have you looked closely at the rates of interest that credit card companies charge for late balance settlements – it is one of the most expensive forms of borrowing.

Instead, why not take a cheap holiday for a couple of years while you save up for a more ‘traditional’ summer holiday? Still pay for it with a credit card, but pay off the balance immediately, so your holiday costs you exactly what you paid for it, not 20% more because of credit card fees!

  1. Credit and store cards leave you with a false sense of wealth

If you are not used to having a lot of ‘disposable money’, the first time you get a credit card or sign up for a store credit card, you can be left with a sense of having more money than you actually have. Just because your credit cards have a sizeable limit this doesn’t mean you have that amount in your pocket. It is not your money, it is borrowed money that not only has to be paid back, but if you don’t pay it back promptly, you will end up paying a lot more for the goods you have bought than they originally cost. To avoid making such a mistake, when you go shopping for clothes, do so when you have the money to pay for them; don’t use store credit cards or your own credit card unless you have the money already saved up to settle the balance of your account at the end of the month.

Herer are some sobering facts on consumer borrowing in the UK – consumer borrowing is classed as borrowing by means of credit cards and store cards, it does not include bank loans or mortgages, etc. According to The Money Charity, “At the end of December 2021, outstanding consumer credit lending was £198.1 billion. Within the total, outstanding credit card debt came to £58.7 billion.” According to, “the average credit card debt per UK household stands at around £2,000. A customer with this balance, paying the minimum monthly repayment of 3% (£60) with an APR of 19.9%, could save around £33 a month if they were to transfer their balance.”

One good rule to follow is to “recognise the difference between needs and wants”. Sometimes this isn’t as easy to do as it sounds, as when we work hard for a living, we feel the need to have something to show for all our effort, some sort of ‘reward’. Regrettably this can often lead to ‘impulse purchases’ that, when looked at in the cold light of day, are far from essential.

  1. When it comes to food, convenience costs, and not just financially

Many of us work long hours and on top of that, we also can have a time-consuming commute home. Consequently, we tend to become more and more reliant on ‘convenience food’, either in the form of pre-cooked meals that just need reheating in the microwave oven; or take-away food that is nowadays handily delivered to your doorstep by a smiling driver, who will be expecting a handsome tip. According to Statista, “Restaurant delivery and takeaway are popular forms of dining in the United Kingdom and an important part of the food service market. In 2021, the average weekly household expenditure on takeaways in the UK was around five British pounds per household. That same year, the average annual spend per person on takeaway food in the UK was £641. With the recent emergence of online ordering technology and companies dedicated to restaurant delivery, the market has entered a new era. The total market value of foodservice delivery in the UK was worth around £10.5 billion in 2021, largely thanks to the rise of online delivery concepts.

That is an awful lot of food, the majority of it not being the healthiest of options either. More to the point, the yearly average of £641 includes many people who never order take aways, so the actual average figure for those who do order take-away food is appreciably higher.

So, instead of becoming so reliant on costly and unhealthy take-away food, look at your lifestyle and ask yourself why you can’t just cook food in large batches and store it in the freezer for reheating when needed – soup, stews, pies, lasagne, the list is endless and most of us cook at some point in the week, we don’t just live off takeaways. Cooking food from fresh is normally half the cost of the same product bought from a fast-food establishment – perhaps a taco or burrito – and the other advantage is the quality of the food you produce will likely be better as well.

And when it comes to the cost of eating out when compared to eating at home, Forbes have a wonderfully eye-watering article on comparing the price of a meal in a restaurant to the cost of cooking the same meal at home!

If you want to get a better idea of what we are talking about, check out this video from the BBC’s programme “Eat Well for Less”!

  1. Examine your lifestyle choices and don’t succumb to social media pressures

While we have covered much with regard to food above, there is another aspect of food shopping that is also relevant to much of the way we live our lives. When we shop for food, do we have to buy ‘branded products’? Do we have to go for the most expensive products based on the fact that the manufacturer is a household name? How often have you checked out the same products without the ‘brand label’? 

The same can apply to the clothes we wear, cosmetics and toiletries, footwear.

Look at memberships. Are they essential? Do we really get our money’s worth, or did it just seem like a good idea at the time to join? 

One of the greatest pressures those in the 20-35 age bracket face is maintaining a social media-worthy lifestyle. So many of us get caught in the trap of needing to present our ‘perfect life’ on Instagram or Facebook. Eating a wonderful meal at a swanky restaurant, going skiing in the winter, showing off our new car, are now important elements of a life we now lead in the goldfish bowl created by social media. Ask yourself if trying to impress people you rarely see is as important as being able to go to sleep at night knowing that you have a good lifestyle and that you are financially secure?

  1. Speak to people who know about finance

Financial advisers are there to help you, though you need to add the codicil that often they also need to help themselves – in other words, some of their advice may be biased based on any potential commissions they may earn. It is far better to make sure from the onset how they make their money to then enable you to establish just how ‘independent’ their advice is. One thing if you live in the UK is to ensure that the financial adviser you use is regulated by the Financial Conduct Authority as this is the standard benchmark of assurance that you are dealing with a genuine professional adviser.

If you are self-employed, having a good accountant is worth its weight in gold. More often than not, while you may see this as an extra cost, a good accountant will save you more money than the cost of their services. According to Unbiased, “Generally speaking, a good accountant should be able to save you at least some of the fee by identifying tax savings for you, in addition to the time they can save you. In some cases, your tax bill may decrease to the extent that you end up saving even more than the accountant’s fee.”

  1. Get into the habit of saving as early as you can

Many of the things we do in life we do out of habit, out of routine. There is absolutely no reason why saving money shouldn’t be part of that routine. Many of us when we are young struggle to see ourselves in thirty- or forty-years’ time, what our life will be like then, yet it is often the financial decisions we make in our twenties and thirties that will have the greatest influence on the life we hope to have when we retire.

A good target for saving is 10% of your take-home income and once saved, it should bever be seen as money that can be spent, unless it is part of your ‘rainy day’ fund. One of the greatest incentives to start saving young is a term called ‘compound interest’. According to Investopedia: “Compound interest is interest revenue earned off previously earned interest revenue. Compounding occurs when you grow money on top of the money you’ve already grown in the past. By saving money at an earlier age, your money is more likely to grow faster due to compounding.”

We hope you have found the above article helpful. Here at Cyclic Digital we are committed to education, but education delivered in an enjoyable and exciting way that makes learning fun, learning that is in lock-step with the demands of contemporary society.