The topic of personal finance has always been something of a social taboo and with 50% of the population scared to even broach the subject with someone they trust, it can be difficult to know where to turn when you have a question about money.
From saving for emergency expenses to saving for retirement, it’s normal to have questions about your finances and sometimes making do with the little information you have been taught at school or at home just isn’t enough.
In this article, we’ve answered your common money questions so you can find the answer you’re looking for and fix your relationship with your finances, whatever the problem may be.
How much money should I have saved for emergency expenses?
When it comes to saving, it’s usually not how to save but how much to save that’s the first question on everyone’s lips.
But what might be enough for someone else might not be enough for you and vice versa and, because of this, most financial experts recommend having between three and six months’ worth of your income saved at any given time.
This should be enough to cover the cost of emergency expenses or, at the very least, tide you over until your financial situation improves.
Should I pay off my credit card every month?
We’re always being reminded about the importance of a good credit score but with so much information out there, it can be difficult to know what we should and shouldn’t be doing.
However, one of the quickest and easiest things you can do to boost your credit score is pay your credit card in full and on time every month. This can improve your chances of being accepted for a loan, car, or mortgage, and prevent you from accruing interest which can, over time, lead to debt.
If you can’t pay off your credit card every month, aim to keep your credit utilisation – the percentage of your total credit that you use – below 30% or less to maintain a good or excellent credit score.
Do I need a budget and what should it be?
It might be one of the most used financial buzzwords but how important is a budget and what should yours be?
The amount of money you should aim to spend on essentials from week to week will differ from person to person and depends on your financial situation but with hundreds of budgeting methods out there, all you need to do is experiment until you find a favourite.
For example, the 50/20/30 rule is a popular budgeting method where 50% of your income goes on necessary expenses (rent, food, utilities), 20% goes towards savings, and 30% is reserved for flexible spending (fun).
What is a credit score?
For some, credit score, or credit rating, is another financial term that causes nothing but confusion.
It’s defined as a measure of your creditworthiness as a borrower and determines how likely you are to be approved for credit with numbers ranging from 300 (poor) to 850 (excellent).
It is based on a number of factors, including your credit history and number of open accounts, and can be positively or negatively impacted by the financial decisions you make with a missed payment likely to lower your credit score.
How soon should I start saving for retirement?
If you’re in your 20s or 30s and haven’t given much thought to your pension or when you’ll start saving for retirement, you’re not alone. According to research from Hargreaves Lansdown, 70% of young people find their pension difficult to understand.
The answer to when you should start saving for retirement will differ depending on who you talk to and how much your annual income is but the general advice is that, if you’re over the age of 35, you should be putting a minimum of 15-20% (or half your age) of your annual earnings into a pension pot until you retire.
When it comes to saving for retirement, the sooner you start, the more time you’ll have to grow your pension pot and, when the time comes for you to retire, you’ll be glad you started when you did.
