Safeguarding Your Financial Future

The first step on the road to safeguarding you financial future is clearing your short term debts, which is basically everything except your mortgage. The second is to have some type of emergency fund, what individuals used to call 'savings'. I read somewhere recently that the average bank account has less than 300 in it - it seems to be a very sorry state of affairs, when a new set of tyres for the car can put most people in debt.

My father used to say: "If you can not afford the tyres, then do not buy the car".

That has always seemed a decent rationale for running my financial life and has always stood me in pretty good stead. Saving is a good habit to get into and ought to be encouraged in children even to the point of letting kids buy Premium Bonds (in the UK), which is nationalized gambling (the total interest on the bonds nationally is given out every month as prizes).

The next question is how much do you require to be safe. Well, there is no real answer to that question. At least not in real monetary terms because we all have different financial needs and responsibilities, but you could say enough to support you 'in the lifestyle that you would expect' for at least three months.

Maybe even six months, if you do not have a right to social security payments in the country where you live. It would be lovely to have a year's worth would it not?

So, if you can do that, why have a credit card, you might ask. Well, a credit card saves you having to carry your gold around with you like the rich men of old had to and it makes Robin Hood's task more difficult as well.

It also makes financial sense to get thirty days free credit on purchases when you are getting thirty days interest on your money. Credit card purchases over a sure amount usually confer additional rights on the purchaser as well - benefits like free insurance against loss for a year.

If however you are only beginning down the road to financial independence, the first thing you ought to concentrate on is paying off your credit card debts. Mortgages are a financial tool that can save you tax, so do not worry about them too much, just make certain that you never- ever - miss a payment. In fact, stay one or two repayments in advance, if you can.

I know that this all sounds terribly easy and I know that you are thinking that it is not, but you are wrong. It is simple and the earlier you start, the easier it is. Learn to put money away each week. If it is too late for you, teach your children. You may think that the banks are ripping you off - I think they are as well - but what else can you do?

Put money away each and every week and be proud to see the amount rising. Be proud that you can afford a new set of tyres, but hoping that you do not have to buy them is all right as well.