Five steps to future-proof your finances

The taboo that surrounds money is beginning to break. Two years ago, money books resembled financial textbooks to make you shiver with memories of maths classes, yawn over intangible investment strategies or frown at half-hearted attempts to explain the jargon of the financial world. Today, money bookshelves look very different.

You’ll find the sleek spine of Otegha Uwagba’s Little Black Book, bubbly yellow of Emma Gannon’s The Multi-Hyphen Method, and blazing pink of Slay in Your Lane: The Black Girl Bible by Yomi Adegoke and Elizabeth Uviebinené. These career guides contain relatable stories and tips including how to navigate a pay rise, address income equality and why talking about money matters.

After the colourful career guides came even brighter books entirely dedicated to money. In Money: A User’s Guide, Laura Whateley guides readers on how to choose and manage credit cards, budgeting and saving for and securing mortgages. Then there was Open Up: The Power of Talking About Money by Alex Holder, who dives into the emotions and psychology surrounding money from how society defines ‘rich’ to why it’s so awkward to split the bill. This year, Emilié Bellet’s You’re Not Broke, You’re Pre-Rich and Alice Tapper’s Go Fund Yourself added further weight to the conversation. Readers are encouraged to sharpen their pencils and write down their money mindset and steps to take towards financial freedom.

Reading has always brought me solace. And marking the pages of these money books has dimmed the panic I often felt around money. It doesn’t have to feel like a maze. Here are five steps I’ve set out for my financial future, based on reading these books and speaking to several of the authors for my podcast series, Bang on the Money.*

Cut down debt

Step one: take a deep breath and look at your bank statements. Find the most expensive debt and start tackling it, one month at a time. To compare debt, look at the APR, which stands for Annual Percentage Rate. Say your overdraft stands at 20% APR and your credit card charges 24% APR, it will be more expensive for you to borrow on credit than debit. These percentages can help you to prioritise which debt to chip away at first.

For student debt, change your mindset. Both Laura Whateley and Emilié Bellet recommend thinking of it as a tax, rather than a loan. It’s linked to your salary so you only start paying it off once you earn more than a certain threshold. If you’re in full-time employment, your HR team will manage your payments, shown on your payslip. You only have to actively make payments if you want to top up your contributions, or if you’re self-employed and working out your taxes yourself. Try not to lose sleep over it and remember that many of your contemporaries will be facing the same mountain — you’re in it together.

Build emergency savings

Paying off debt means learning how to save, which usually means learning how to budget. It took seven money books, plus an extra couple of months of resisting, for me to finally create a budget. The key is to be realistic and download apps designed to help you. I already used Starling Bank for my everyday account and I’ve now linked it with Emma, a smart budgeting app that enables you to set targets for bills, groceries, travel, eating out etc.

My aim is to build up three months worth of living expenses, known as an emergency fund. At the moment, I’m setting money aside through a Starling Goal, a space to keep savings separate. You could also send money over to a separate savings account, such as Marcus. The benefit of Marcus is that it has 1.5% AER, which stands for Annual Equivalent Rate and tells you the amount of interest you’ll be paid. Starling pay 0.5% AER up to £2000 and 0.25% on amounts over £2000. The higher the AER, the more your money will work for you but make sure the savings account doesn’t have too many restrictions in case something goes wrong and you need to access it urgently.

Automate your investments

When I asked my podcast guests about their top money apps, half of them talked about MoneyBox, the app that rounds up your spending and invests the change for you. If you spend £2.40 braving the Central line, MoneyBox will add 60p to your investments. Say you invest an average of £1 a day, in 25 years you would have set aside more than £9000 which could more than double if you have an average rate of return of 6%. Your rate of return will depend on several factors but the longer you invest for, the longer it has to build and stabilise.

There are lots of investment apps out there that enable you to automate payments by setting up a weekly or monthly direct debit. I do this through WealthSimple. It’s a Starling Marketplace partner so I can see my balance within my Starling app, but you could also download Hargreaves Lansdown or Nutmeg. Remember that investments can go both up and down and that ideally, you should clear expensive debts and build a cushion of savings before you start investing.

Up your pension

The word ‘pension’ makes me think of wrinkled paperwork. It’s something I’d rather not have to think about. If you’re in full-time employment, you’ll be automatically enrolled and both you and your employer will make monthly contributions. Even though this happens for you, take an interest in how much is being contributed, who is investing it and if you can afford to increase contributions. Don’t opt-out if you can avoid it — your future self with thank you.

If you’re self-employed, you have to sort it yourself. There always seems to be a million things I’d rather do than lock away money for thirty years. My remedy is to pull out a calculator, get the cogs whirring and dive into what compound interest means. Compound interest is the interest made on interest ie. if you invest £100 and by the end of the year you have £101, the next year you’ll be investing your new amount. And so it grows and grows.

Six months into freelancing, I finally set up monthly contributions to my pension. I’ve chosen to use PensionBee but there are lots of other options out there, such as Nest.

Talk about money

For many people, talking about money is a hurdle they’d rather not face. If you’ve grown up with transparency around money, tips from parents or perhaps some form of financial education at school, opening up may be easier. But if money has felt like a taboo or something you’d figure out when you became a grown-up, it may be something you’re still waiting to get a handle on.

The key lesson I’ve taken from these books is that no one is going to do it for you — only you can decide how your bank balance makes you feel, how to split your spending or how to plan saving for a house deposit or holiday. It’s daunting but I always find that talking helps, if not with friends or family, then within online communities such as Vestpod or through Instagram accounts such as Money Medics, Go Fund Yourself or My Frugal Year. Everyone’s money path is different. But you don’t have to walk it alone.

*Bang on the Money is an educational podcast and does not constitute financial advice.