When you watch children playing games, you come to realise that they really have few cares in the world. As we grow older, it’s natural that we should lose that sense of innocence. We may also begin to encounter an increasing number of worries.
Growing a little older needn’t involve having a more negative outlook on life. In fact, it’s fair to say that a greater level of maturity also brings many wonderful opportunities. You may, for example, be thinking about starting your own family.
As you think back to your teenage years, you may feel that buying a home, being involved in a long-term relationship and having children are all acts that appear to define people as being grown-ups. It may be time to reflect that your life is now changing.
Although there’s plenty of fun to come in the years ahead, it’s also clear that you are facing a time of added responsibilities. In particular, it can be seen that many of the concerns that you will now have will surround your finances.
There can be no doubt that there is pressure associated with having to make mortgage repayments, or to ensure that your children can have all that they need. It’s natural that you should want to be sure that your loved ones will have the best opportunities in life.
It’s also an unfortunate reality of life that some of those opportunities will depend on having money available. If you want to be sure that your life, as a grown up, will be comfortable then it makes sense to do a little financial planning.
The problem with mentioning financial planning is that many people see it as being rather boring. Indeed, you may not feel like spending endless hours poring over bank statements, spreadsheets and bills.
In order to ensure that such a task seems a little less onerous, it’s worth concentrating on the outcomes that you are aiming for. Spending time on financial planning now may mean that you have access to more family holidays in the future. It may also help to make sure that there is financial security for your family. It may mean that you are able to amass enough savings to expand your living space and build that backyard guest house for some extra income.
There’s usually some sort of financial balancing act to perform. When we were younger, it’s likely that we would make more impulse buys. It would seem perfectly natural to spend money on video games, music, clothes and entertainment. Such purchases are still possible, but it’s possible that you will have a more rigid spending structure in place.
The reality is that you are likely to have to give priority to more sensible requirements. That might mean saving for a deposit on a house, or simply having enough money to buy nappies and baby food.
Budgeting is all about working out how much money you have coming in and how much you are spending. It’s also about considering how things will change in the future. What impact will your new responsibilities have on your spending requirements?
It’s then a question of working out how much money you have available and whether there is room to reduce spending levels in some areas. This may mean, in some cases, cutting out a few of those impulse buys.
It may also, however, involve thinking about large sources of expenditure. If you have significant credit card bills, for example, then you’ll find that paying these off quickly can have a dramatic impact on your levels of spending. That’s simply because credit cards usually have high rates of interest associated with them.
Shopping around for the best mortgage rates can have a significant impact too. As an example, let us say that you are planning to take out a 100,000 mortgage and that you’re looking to repay over a period of 25 years. With a 5% interest rate, this would mean that you would need to spend almost 7,000 per year on repaying that mortgage.
If you were able to obtain a mortgage with a 4% interest rate, by comparison, then you’d save yourself almost 600 per year. That’s a hefty difference and demonstrates the importance of getting the best deal.
The same is true when it comes to your savings. You should always look to use ISAs to take advantage of the tax-free benefits on offer. Beyond these, it makes sense to shop around for the best savings accounts on the market. Remember that investments that are linked to the stock market may offer better returns, but they are also likely to involve more risk.
Now that you’re a grown-up, it’s time to start thinking like one. That means that you need to budget for children and for family life.