How’s your financial health? If that seems like a strange question, stick with us because, if you rent, the answer to that can have a huge impact on your life today and in the future.
So, what do we mean by ‘financial health’? There are three main elements to this. First, it’s about making sure that your income and expenditure are in balance. Second, it’s having some financial back up in the form of savings or access to funds for emergencies. And finally, financial health means having a good track record of managing your money and a healthy credit score.
Why is financial health important for renters? Well, it affects the deals you might be offered from credit cards to phone contracts and bank accounts. Whether you hope one day to get a mortgage, or are one of the millions of households who intend to rent long-term, robust financial health leads to better rental opportunities and better mortgage deals, so it’s worth taking seriously.
Here we outline our 5 top tips to manage and improve your financial health.
1. Set a budget and stick to it
Let’s start with balancing your budget. Your rent is probably the biggest payment you make each month but to really get a grip on your finances, you need to be aware of all your outgoings, then check these against your take-home pay, and make adjustments if that’s not looking pretty. Sit down and go through everything you spend. There are your regular bills - gas, electricity, phone, broadband, council tax and so on. What are your travel expenses for cars or commuting? Check how much you pay for insurances, mobile phone, and childcare. Add in what you spend on food, clothing, holidays, and don’t forget to include Christmas.
Once you really understand where your money is going, and where you might make realistic economies if you need to, you’ll be in a good position to work out what you can save. The Canopy budget tracker can help you keep a track of your spending by helping you to categorise your spends easily and keep on top of them too!
2. Put some money away
How many times have you got your pay and thought I’ll put some money aside into a savings account or create an emergency fund which you’ll add to. But actually you don’t and end up spending it? There is a way to do this and the easiest way to do it, is to automate the process. This means setting up an automatic transfer of funds straight into a savings account every time you get paid. So before you can think of spending it it’s already been put safely away.
You may think you don’t have enough to put away but at the end of the day something is better than nothing. And once you get into the habit of putting some money aside you many even get to the point at which you can increase the amount you put away because out of sight is out of mind!
One thing that is worth considering is whether you put your savings towards a traditional rent deposit – usually the equivalent of five weeks’ rent - which will lock up the money until your tenancy ends, or whether you opt for a deposit-free scheme. These cost around one week’s rent for what is, in effect, an insurance scheme. The tenant pays to set up the scheme, and this gives the landlord protection against unpaid rent or damage, in the same way that a cash deposit does. Opting to go deposit-free could free-up that lump sum required by a traditional deposit that you can then set aside as savings. And if you can add even a small amount to this each month, your savings will soon start to look healthy.
3. Put a temporary stop on spending habits
When spending money is as simple as swiping a card, tapping a phone, or clicking a button it’s so easy to impulse buy and spend. While a couple of lattes, a few clicks on online sale items or visits to the corner shop to pick the odd thing up don’t feel expensive at the time of sale, they all add up over time.
One way to curb these spending habits is by putting a “hold” period on all purchases. So instead of hitting the “buy now” button or tapping your card you should consider waiting 24 hours, or even 72, before completing the purchase. Creating a waiting period stops that instant gratification rush and allows for logic and reasoning to kick in.
After waiting, you can return to the online basket or shop to reconsider the purchase. You might just realize you don’t really need it.
4. Get insured
You can help protect your finances by having some insurance in place. Common types of insurance include car or bike insurance, contents or renters insurance, life insurance, and some employers even provide health insurance.
Whilst you may be tempted to skimp or not even have any insurance in place, remember that it protects you from catastrophes that can send your finances spiraling.
If you’re not sure where to start take a look at our partners page where we have teamed up with some of the most innovative financial service companies to provide you with renter centric options when it comes to insurance.
5. Give yourself some credit
Finally, let’s take a look at credit history. A person’s creditworthiness plays a vital role in purchasing bricks and mortar. And renters are slowly waking up to the importance of a credit score when renting. Essentially, your credit score is used by lenders to decide how much money you are eligible to borrow. The higher the score, the lower the risk from the lender’s perspective. Until recently, one problem tenants faced was that rental payments didn’t count towards a credit score, unlike mortgage payments. Fortunately, this has now changed, and by using platforms like the Canopy app, making rental payments on time can boost your credit history.
By looking after your financial health, you are looking after your future, so it’s really worth investing a bit of time and attention to this. Start boosting your rental health now by downloading the Canopy app and seeing all the different ways Canopy can help.