Saturday, September 20, 2008

Building a New Financial Future After Separation

After separation your finances won’t be in the same shape they were when you were part of a couple. You’ll still have your bills to pay, plus monthly maintenance for your children, and have to do it all on a single income. So how do you work towards financial security in the future?

The Beginning

You’ll find that in many cases you’re starting from rock bottom, with barely enough money to scrape by, and budgeting each penny very carefully. You might well feel like you’re on a treadmill, and simply working to survive. But that’s the ideal time to start planning.

Put a little away every week, even if it’s only £5, in the highest interest savings account you can find. It’s money you should touch only in the event of an extreme emergency.

Be sure you make your credit card payments on time, even if you can only afford the minimum payment. Failure to do so can have an adverse effect on your credit rating which could have bad consequences in the future.

Make a Plan

Consider where you’d like to be financially in five years or 10 or 20. What will it take to achieve that? Be realistic about what it will take, and make a plan to get there. It might require being harsh with yourself, but as long as you have enough to cover your bills and get by, then it can be a workable idea.

If you come into extra money – overtime, a bonus, or even a bequest – salt a large portion of it away in your savings account. When you reach a certain amount - £1000, say – look around for a better opportunity for that money, where it will generate more money for you. Those opportunities vary, and the amount of return varies with the risk. Be conservative, and re-invest what you make.

As Time Passes

Saving can become a habit, and its one well worth learning. However, financial security, even on a small scale, won’t happen overnight. But over the course of several years, if you manage your money wisely, you’ll find yourself on an even keel and moving ahead.

It’s never too early to think ahead to retirement, even if you’re still young. Once you have a cushion of money underneath you (the general advice is enough to sustain you for three to six months, in case of unemployment), you’d do well to think about ISAs and pensions. Read carefully before making any decisions, and invest only what you can comfortably afford; there’s no point in stretching yourself too thin now to assure your future, since you still have to live.

Keep to the practice of living within your means. It might be nice to own a new car, but do you really need one, for instance? Think before you spend anything. Once you’ve paid off your credit cards, don’t take on any new ones, especially store cards, which generally carry a much higher rate of interest. Also, take advantage of deals to transfer existing balances and receive lower interest rates.

Reaping The Fruits

Your circumstances might change, for better or worse, so be willing to be flexible. If you meet a new long-term partner, then obviously your priorities will change a little. But whatever occurs, don’t lose your goal of financial security for yourself.

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