1. Pay off debts first

It’s a basic rule of money management that you pay off your existing debts before you start to save. This is because saving rates are almost always lower than borrowing rates so your money is best used to get rid of expensive debts. However, there are some exceptions.
Firstly, your mortgage is a long-term and (relatively) cheap debt, and secondly, student loans are charged at such a low rate of interest (around the level of inflation) that you are often better off saving any spare money rather than repaying early. But most loans and credit cards (with the exception of 0% cards) should be paid off before you start saving, if possible.

2. Borrow wisely
Despite the above rule, borrowing is a part of modern life and it’s often practical to have credit cards and loans. But getting the best deals is essential to ensure you don’t pay over the odds. Overdrafts are great if you have an expense that temporarily tips you into the red, but can be expensive for longer-term borrowing. A credit card can be very useful, but if you have a large debt with a high APR (annual percentage rate), it could take years to pay off. For larger amounts, a personal loan or fixed-rate credit card can really make sense.

3. Save, save, save
If you have paid off all (or most) of your expensive debts, the first thing you should do is start saving up a rainy day fund in an instant access savings account. The equivalent of at least three months’ salary is a good starting point to cover unforeseen expenses or loss of income. Shopping around for a good savings account is easy and interest rates vary massively between products, so switching could make a huge difference to the interest you earn.

4. Proper pension provision
Pensions are an important financial step to setting up a comfortable retirement. If you haven’t yet started saving into a pension scheme, it’s a good idea to start now. Remember, if you don’t provide properly for retirement you will have to manage on the State pension, which is currently just ÂŁ95.25 a week.

5. Be disloyal
Don’t be loyal to your savings provider, credit card issuer, mortgage lender or insurance provider. You will very rarely benefit from sticking put and the best deals tend to be available to new customers. So, become a new customer and switch and save. By using a comparison site like Confused.com, it won’t take long to give yourself a complete financial makeover.

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Get more tips on long term financial health at http://www.articletrader.com

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