Three Simple Steps For Managing Your Finances After 50
According to data from the Office for National Statistics, more than 35% of the UK population is over 50.
If you fall into this group, it’s likely that you’re thinking about retirement and about what you can do to improve your financial situation.
As you grow older you’ll need to manage your money more carefully to ensure healthy savings and a decent pension pot that will help you to live your retired life at its fullest.
So, what should you do to take control of your money?
In this article, we’ll share three simple steps for managing your finances after 50.
- Assess your situation
The best way to start is to take stock of all your circumstances. This will give you the information you need to start managing and improving your finances. Consider doing the following.
- Estimate your monthly spending
- Make sure you have a safety net of 3-6 months’ expenses saved up
- Ensure you’re claiming for any benefits you may be entitled to
- Check your credit score and take any easy steps to improve it
This is also a good time to set some financial goals.
These could include paying off your mortgage, building your retirement fund, or saving for that holiday of a lifetime you’ve always dreamt of.
If you’ve never had one, this could also be the time to try out a financial coach who can give you tips on how to improve your financial situation.
A financial coach will also be able to advise on how to manage your money according to your financial goals, helping you understand your money habits or how to manage debt effectively.
- Create a budget
Establishing a proper budget and using it will help you ensure you don’t overspend and stay on track to achieve your financial goals.
The essential steps to creating a budget are tracking your spending and setting realistic goals.
There are several apps that can help you track your spending, or alternatively you could keep your money management all in one place and track it through your personal banking app.
Setting realistic goals can be a bit trickier, but it is crucial to come up with short- and long-term goals to keep you motivated in your financial journey.
Consider using the 50/30/20 rule, a simple and effective budgeting method that’s extra easy to follow.
It works by dividing your money in set amounts across the three most important categories you need to spend on. These categories are as follows:
- Needs – These are the expenses you don’t have any choice about, including mortgage, rent, minimum loan repayments, energy bills, and basic groceries.
- Wants – These are the non-essential expenses that you choose to spend your money on, including meals out at restaurants, new clothes, entertainment, leisure centre memberships and holidays.
- Financial future – This category includes any expenses that go towards your financial goals, including building an emergency fund, getting out of debts, growing your savings, or investing in retirement funds or pensions.
If you want to start using the 50/30/20 rule, the first step is to add up your total income.
Next you should ensure you’re only spending roughly 50% of your total income on your needs, leaving roughly 50% remaining for the other two categories.
You then split this remaining 50% of your income, allocating 30% towards your wants and 20% towards your financial future.
- Cut unnecessary expenses
Many of the expenses that seemed necessary when you were younger won’t be necessary in your fifties. This gives you a great chance to reduce unneeded spending, helping you stay on track with your budget.
As well as unneeded expenses, you should also look at areas where you are wasting money.
You could take simple steps like choosing cheaper brands or cancelling subscriptions to a service you no longer use.
For example, if you have multiple streaming subscriptions you could opt to only keep one per month, alternating between different ones throughout the year.
Cutting expenses could also involve larger choices like no longer taking out annual car insurance and opting for temporary cover instead.
To illustrate this last option, Marc Pell, CEO of temporary car insurance provider Tempcover, told us:
“Temporary car insurance could be a flexible and cost-efficient option that’s worth looking into.
By providing coverage only when you need it, it presents a solution for those who have the opportunity to borrow or share a vehicle, as well as those with cars that spend more time parked than on the road.
Rather than paying for traditional annual coverage when your car remains idle, opting for temporary car insurance allows you to save money without compromising on protection.”
Managing your finances in later life can be a challenge. But you can make it significantly easier by following our simple steps above.