Compare The Platform: Are you an ostrich or an owl?

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Are you an ostrich or an owl?

When it comes to financial planning some people are ostriches, burying their heads in the sand, while others are owls, wise and knowledgeable enough to take an interest in their financial wellbeing. If you’re an ostrich and you struggle to stay on top of your finances, here are six simple steps to pull your head out of the sand and get your finances in order:

1. Start with a budget

Knowing what you have coming in and going out is essential. How can you know what you can afford to save if you don’t know how much you need to live off?

Of course, to truly make a budget work you also have to stick to it. Knowing what budget you’re working with is important, not just for now, but also for the future. If you know what life costs you now you’ll be better placed to know how much you’ll need in retirement and whether you’re on track to achieve it.

Do you have any debts? The cost of loans and credit cards is much higher than the interest you might earn on a savings account, so it pays to pay off your debts more quickly. If you learn to budget and stick to it, you’ll find that you’re less reliant on credit cards to get you out of a jam or make your money stretch until the end of the month.

2. Make time to manage your money

People often complain that they don’t have enough time to manage their personal finances. Some people say they are too busy with other things,  and some people simply find it boring. However, it’s essential to make time to look after your money because, let’s face it, no one else will.

Getting into the habit of regularly reviewing your finances, will make it less like hard work and easier to achieve. Set aside half an hour a week to get started.

3. Is your money working hard enough?

Check that your money is working hard enough. If your hard-earned cash sitting in a savings account that pays next to nothing, low-interest rates and inflation will gradually eat it away. Look for a better home for your savings.

If you have enough set aside for emergencies, consider putting some of your savings into investment funds. Investments normally involve some risk to your capital, but also the prospect of better returns than you can expect from savings accounts.  Find out more about savings and investments here.

4. Streamline your finances

Keeping tabs on how your savings and investments are doing is tricky when they’re with several providers. The task is a hundred times easier if you have everything you need all in one place. Use the platform calculator to find the best home for your money.  Most DIY platforms make it easy to transfer your ISAs.

If you’ve worked for a number of employers you’re likely to have a number of pension plans with your name on them. Keep records of all your pensions and how much you have invested. If they’re defined contribution pension schemes, you may find it easier to consolidate them into one pension; that way you get to see all your investments in one pension you’ll have greater control of what you invest your pension in.

5. Review your savings & investments

Once you’ve done points 3 and 4, set up standing orders into your savings accounts or ISAs. It will be just like any other bill and you won’t even notice the money going out.  It doesn’t matter how small the amount is, the trick is to start saving now as compounding will help your savings grow faster.

Make time to check your investments on a regular basis and ensure that your savings and investments are working hard enough and are on target.

6. Think about the future

None of us knows exactly what is around the corner but knowing you have savings and investments and your money working as hard as possible, will give you peace of mind.

When you’re planning ahead, it pays to consider the unexpected and expected. Do you have enough set aside for emergencies like replacing the washing machine or the car?  Have you written a will so your loved ones are looked after when you’re gone?

What about retirement? Will your pension pot cover the cost of your care later in life? Too few people take into account the cost of care when figuring out how much pension they need in later life. While none of us wants to think of a time when we could become too ill to care for ourselves, the odds of that happening increases as we get older.

One way to save in a tax-efficient way that doesn’t tie-up your money, but still gives you the flexibility is to use your annual ISA allowance.  Now that you can save up to £20,000 every tax year in stocks & shares ISA, you can quickly save a substantial sum that will grow nicely over the years.

Most platforms will allow you to save as little as £50 per month into an ISA.

Use our calculators to compare fees and select a platform that suits you best.

Photo by Eelco Böhtlingk on Unsplash

Owl photo by Paul Morley on Unsplash


About the Author:

Bella has 20 years’ experience in the research and analysis of the investment industry. She set up Fundscape (comparetheplatform's owner) in 2010. Before Fundscape, she worked for Thomson Reuters as Global Head of Research and Publications (Lipper) and was the author of numerous publications and reports. Bella has a master’s degree in International Business and is fluent in four languages. She is particularly fussy about grammar and punctuation, and loves going to the theatre, disco dancing and pub quizzes. @bella_caridade @fundscapeuk

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