You never know what’s around the corner but a good financial base will help you through tough times. Finance editor Kalpana Fitzpatric­k reveals how to build your money muscles…


Build a firm base to help you cope with life’s ups and downs

If your finances are keeping you up at night, you’re not alone – around 48%* of us worry about money. While we may have enough to pay bills and save small amounts, many feel uneasy about long-term financial stability. With redundanci­es at record highs and 9.9m jobs put on furlough at the end of last year, job security continues to play on the mind. And although some made savings during the pandemic, 40% expect living costs to go up**, and are reluctant to spend. But whatever your financial position – whether you’ve accumulate­d savings or are on a lower income – there are ways to make your money go further. Here’s how to become financiall­y stronger in six steps.

1 Know your numbers

Around 59% of us are unaware of how much is in our bank account†, let alone know how much our net worth is – the value of everything we own. Tallying up your worth is a big step towards building a strong financial future. Knowing this and your monthly outgoings gives you a financial health snapshot and keeping track means you can see how you progress over time.

Lisa Conway-hughes, chartered financial planner and co-founder of the Ladies Finance Club UK, says: ‘You don’t need to be a spreadshee­t queen, just track two numbers – first, the difference between what comes in and what goes out; second, the difference between your assets (things you own) and your liabilitie­s (what you owe).’

2 Make your money work harder

As long as you have at least three to six months’ income set aside for emergencie­s, invest the rest to help your money grow. You could earn around 8% interest – much better than the derisory rate on most cash accounts of around 0.1%. Never invested? You could set up an account with digital providers such as Nutmeg or Wealthify, who assess your attitude to risk and suggest funds for you.

‘Alternativ­ely, a multi-asset fund with an online provider can be a good solution for beginners. Often referred to as one-stop-shop fund, they make the investment decisions for you – splitting your money across a mix of different assets, mainly shares and bonds,’ says Myron Jobson, personal finance campaigner at Interactiv­e Investor.

Use your £20,000 ISA allowance, too, so you won’t pay tax on your investment returns. Note, investment­s can go up as well as down, but over the long term, you should see an upward trend. Ideally, you should plan to save for at least five years when investing.

3 Retire richer

If you’re employed and in a workplace pension, it’s likely that you’re paying the minimum contributi­ons, which is 5% of your income (plus 3% from your employer). Ideally, you should be putting away a percentage that is half your age in order to live comfortabl­y in retirement. If you can’t manage that, pay in just a bit more – an extra 1% can make a difference when you stop work.

‘For someone on £30,000 a year, just 1% more added to your work pension contributi­ons can mean an extra £23,000 on your retirement pot: £209,000 compared with £186,000 at age 68. The monthly cost of this 1% when you are in your mid-30s starts off at £25 per month,’ says Becky O’connor, head of pensions and savings at Interactiv­e Investor. ‘So get going with that extra 1% – or £100 a month if you can – then feel good about a stronger future.’

Self-employed? For advice on setting up a personal pension, go to moneyadvic­

4 Future-proof your income

Even with strong savings, major life traumas – such as an accident, divorce or bereavemen­t – can significan­tly set you back as you may need time off or have to stop work. Royal London says 17.6m people admit they wouldn’t be able to cope financiall­y in the event of a major life shock. Put these measures in place to protect yourself and your loved ones:

● Make a will. Three out of five people admit they do not have a will, meaning their assets, affairs and what happens to their dependents will be left to chance. ‘Many people are put off organising a will as they feel that they are too young and healthy to have one, or they falsely believe that friends and family will have the power to decide between them who should inherit what, but that simply isn’t the case,’ says Andrea Bingham, head of the wills, trusts and probate department at JMP Solicitors. Find out more at

Lasting Power of Attorney (LPA). A will

● safeguards your wishes when you die, but an LPA can protect you when you’re alive by appointing someone you trust to look after your finances if you are unable to. Apply at

● Set up life cover. If you have children, a partner or other relatives who depend on your income to cover the mortgage or other living expenses, then consider life insurance – it will help provide for your family in the event of your death. See what benefits you can get via your employer first, as that cover may be sufficient.

5 Double up

Around 40% of UK workers have a side hustle, says Henley Business School. Having a second source of income can be good for extra financial security.

‘A side hustle gives you flexibilit­y and freedom,’ says Ramit Sethi, author of I Will Teach You To Be Rich. ‘Ask yourself, “What do people ask me to do because I’m so good at it? For example, do my friends ask me how I designed my apartment?”’ Use a Facebook or Instagram page to let people know about your services and share images. ‘Test ideas until you find one that clicks with three paying clients. You control how big or small – or fast or slow – you grow.’

You must pay tax on second-income earnings above £1,000, using HMRC’S self-assessment service (

6 Slash your costs

According to Yorkshire Building Society, more than half of those asked say the pandemic has negatively impacted their mental health, with 65% feeling anxious about their finances. These moves can help make your bank balance stronger:

● Create a budget. The Money Advice Service’s budgeting tool (moneyadvic­ is a good start to help you get a clear picture of your expenses versus your income. Once you’ve done this, ditch unnecessar­y expenses and review the ones you need. For example, if you haven’t switched energy providers for a while, you could be overpaying by hundreds of pounds a year. Look at comparison sites such as Uswitch or Compare The Market. With interest rates at record lows, it is a good time to review your mortgage. Try an online broker such as Habito.

● Keep track. Stay on top of your budget using apps such as Yolt or Money Dashboard. The apps connect all your accounts and then show your spending on one handy dashboard. Apps such as Snoop and Emma help you save by letting you know when it thinks you’re leaking money and if there are cheaper deals on your everyday bills.

● Cheaper overdrafts. We all need a little wriggle room, but dipping into an overdraft can cost you as much as 40% in charges. Consider switching to a bank that offers an interest-free overdraft buffer. M&S Bank and First Direct, for example, both offer a £250 interest-free overdraft on current accounts††.

● Credit card debt. If you’re paying added interest each month, then switching to a 0% balance transfer card will help reduce the debt faster. Find 0% deals at moneysuper­

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