Habits for financial security

Financial security doesn’t mean living a life of self-deprivation; it’s about managing your money to ensure your future is stable.

People have a tendency to live above their means. If you wrote down everything you spent in a month, you would find many areas in which you could save.

Learn how to create a budget based on your earnings and expenses, and practice the self-discipline needed to stick to your plan. Make a list of expenses for a year. Assign them to months. Savings transfers should go off first.

It’s foolish to use borrowed money to finance a lifestyle you can’t afford. Loans should be used for emergencies and expenses that will allow you to progress.

Your income is your greatest asset, and anything that you can do to increase your value to your current employer and prospective employers is money well spent.

You need to ensure that saving for your children’s education doesn’t cost your retirement savings. There are ways to find money for education – from scholarships to part-time work. You can save for retirement and education in two different accounts,.

The best way to ensure that you’re saving every month is to automate transfers into your savings accounts once your salary comes in. That way, you’ll only spend what you have left after your savings have been deposited.

Ideally, you’d keep the equivalent of three to six month’s living costs in an easily accessible savings account.

By automating your payments as debit orders at the start of every month, you can ensure your bills are paid before you’re tempted to use that money elsewhere. This strategy eliminates the risk of late payment charges.

Shirley Smith is COO at Old Mutual Finance. This was first published on Old Mutual Finance’s blog