Pay off the debt with the highest interest charges firstĬheck if there are any restrictions on whether you can repay each debt early, as some fixed term arrangements come with hefty early repayment charges. Start by listing all your outstanding debtsĬonsider consolidating debts into a lower interest arrangement For instance, if you have expensive debts, where the interest is higher than you would earn in savings interest or investment returns, then you should tackle that first. There are some circumstances where it might not make sense to save. For instance, you might choose to top up your pension, save for a dream vacation, and set up an ISA for a house deposit. You can split this between different goals, and you might choose different financial products for each. Generally, setting aside 10% of your wages each month is good practice, if you can. The nature of these aims, how far in the future they are, and your appetite for risk will determine whether this money is best saved or invested. This could be a wedding, a holiday, or even Christmas spending. It means that you’ll still be able to pay your rent or mortgage, keep up with bills and put food on the table.Īlongside these emergency savings, you might also want to set aside spare cash for future goals. This protects you if you lose your job or are too sick to work. Some recommend setting aside as much as six months of income. The general rule of thumb is that you should have at least three months’ worth of living expenses in easily accessible savings. It means you can book a holiday without worrying about getting into debt, and also gives you a safety net for unexpected events such as the boiler breaking. Having money set aside gives you freedom as well as financial security. Why it’s important to have savings and investments
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