Making good financial decisions isn’t always easy - with temptation all around, most of us are guilty of making impulse purchases and not always giving our savings accounts enough attention.
If you’re trying to get better at managing your finances, we’re here to help. From day-to-day financial decisions to those big life-changing ones, we’ve put together this blog post to give you a little advice on how to make sure all your money-related choices are good ones.
What financial decisions are important?
Even the most minor financial decision has an impact on your bank balance, so they’re all quite important. However, some choices - like taking out a loan or buying a car - are a lot more significant, meaning you should take extra care researching them and making sure they’re the right decisions for you and your wallet.
Who do your decisions impact?
The person who will be most affected by your financial decisions is you. From spending too much to saving lots, you’re the one who will reap the positive or negative impacts of your financial decisions.
However, your choices will also impact your friends and family, especially if you have children. From covering all of “Santa’s” spending to making sure the cupboards are stocked full of healthy snacks, your children or other dependents rely on you for everything. That means they’ll also be affected by any good or bad financial decisions that you make.
Short-term financial decisions
Short-term financial decisions may seem inconsequential, but the money you spend day-to-day can really add up, so being savvy with small spends is vital.
Being thrifty with your groceries is a great way to do this. Choose supermarket-own brand products if possible and try getting shopping delivered - it’s a lot easier to avoid impulse-buying temptation when you don’t have to wander through countless aisles filled with goodies. If you’re an NHS employee, there are also lots of supermarket discounts you can take advantage of.
Similarly, try to make sure you take a packed lunch and a flask when you go to work or university to save you having to splash out on meal deals and pricey takeaway coffees.
Medium-term financial decisions
Most of us have to make medium-term financial decisions every few years - for example, buying a car. Although it’s not a decision that will affect your lifelong finances, it’s still pretty big, so it’s important to get the best deal possible.
In theory, buying the cheapest car you can find seems like the best way to save money, but in practice, you’ll probably just end up with a banger that will cost you hundreds of pounds in repairs and may not even be safe.
It’s important to remember that being savvy doesn’t mean you can’t buy nice things, and there are even some hacks that will help you get a good bargain when buying a brand new set of wheels. For example, there are usually good discounts in December because not many people buy cars in the run up to Christmas and sales people are eager to hit their annual targets. If you walk into a dealership at the end of the year, you’ll probably walk (or drive) out with a bargain. There are also salary sacrifice car schemes for NHS employees too.
Long-term financial decisions
It’s hugely important to make good long-term financial decisions because they’re the sort of choices that will have an impact on the rest of your life.
In the long run, buying a house or a flat is a better financial decision than renting, but it’s very difficult for most people to afford a deposit and commit to a mortgage, so it’s a good idea to start saving early for your first property. We recommend opening a specific savings account for your house fund and looking into ways that the government can help, for example their Lifetime ISA. With this scheme, the government will add 25% to whatever you save each year, up to £1000.
Furthermore, if you have a family, a sensible long-term financial decision would be taking out life insurance to make sure that your children or partner won’t end up in financial trouble if something happens to you.
Is a loan a good financial choice?
This depends on the loan in question. Getting a payday loan or borrowing from a loan shark definitely isn’t good. However, if you’re borrowing from a bank or reputable company like Salad Money, then a loan can certainly be a good financial decision.
We all need a little help to cover costs sometimes and often a loan can be the perfect way to do this. If you work as a key worker, you can borrow from us because we offer affordable loans of up to £1000 to help out hard-working employees when they need it the most to stop you from falling prey to toxic high-cost loan companies.
A student loan can also be a good idea because getting a university degree is the best way to obtain a job with a high salary, making the loan worth it in the long run. Furthermore, you aren’t required to pay back your student loan until you’re in a good financial position. For example, if you took out a student loan this year, you wouldn’t need to pay a penny back until you were earning over £2200 a month.
Loans are also a good way to build credit history. For example, taking out a small personal loan now (to cover the price of a sofa or television, for instance) and repaying it on time could help you get a mortgage in the future. This doesn’t matter for Salad Money loans though, as we use Open Banking rather than credit history to approve our loans.
Making good financial decisions can be tough, but we’ve put together a few final tips that should help.
- Automate your decisions
Automating your decisions is a great way to make good choices and make saving part of your routine. Set yourself a specific day each month to put away some money - this could be the first day of the month, the last day of the month, or the day you get paid. By committing to a day, you won’t be able to put it off or make excuses. We recommend writing it in your diary or setting an alert on your phone to make sure you don’t forget.
- Set financial goals
We also recommend setting an amount that you’d like to save each month to help with motivation. The amount will depend on how much you can reasonably afford to put away, so try not to be too ambitious with your savings because it could demoralise you - just save what you can and enjoy seeing the amount grow.
- Be disciplined
It’s really important to be disciplined when you’re trying to make good financial decisions, so try not to give in to impulse purchases and unnecessary spending. A good way to do this is by making yourself wait two days before buying anything, so if you see an item of clothing or a gadget that you really want, don’t buy it straight away. Wait two days and then reconsider - often you’ll realise that you don’t actually need it and just got swept up in the moment. If you’re used to buying things on a whim, this tactic should definitely help.
Good Financial Decisions
Next time you go food shopping, consider a loan, or make a big purchase, we hope that this advice will help you make good financial decisions.