Ask Sarah from Universal Finance: Common Financial Questions Answered
Navigating personal finance can feel overwhelming, but a little expert advice from Universal Finance can go a long way. To help you make informed decisions, I’ve tackled some of the most common financial questions asked by our clients.
1. How Much Should I Be Saving Each Month?
There’s no one-size-fits-all answer, but a good rule of thumb is the 50/30/20 rule:
Spend 50% of your income on essentials (like rent, utilities, and groceries).
Use 30% for discretionary spending.
Save or invest 20%.
If saving 20% feels daunting, start smaller and work up. Automating your savings ensures consistency and removes the temptation to spend.
2. Do I Really Need an Emergency Fund?
Absolutely! Life is unpredictable, and having an emergency fund can prevent you from relying on credit cards or loans during tough times. Aim to save 3–6 months of essential expenses. Keep this money in an easily accessible account, like a high-interest savings account, rather than investing it.
3. What’s the Best Way to Pay Off Debt?
Two popular strategies are:
Snowball method: Focus on paying off the smallest debt first for quick wins.
Avalanche method: Pay off debts with the highest interest rates first to save money in the long run.
Whichever method you choose, always pay at least the minimum on all debts to avoid penalties.
4. Should I Be Investing or Paying Down Debt First?
This depends on the interest rates. If your debt has a high interest rate (e.g., credit cards), prioritise paying it down. However, if you have low-interest debt (e.g., a mortgage) and extra cash, consider splitting your money between debt repayment and investing for long-term growth.
5. How Can I Save for My Child’s Future?
Junior ISAs (JISAs) are a popular option in the UK, allowing you to save or invest up to £9,000 per year, tax-free. You could also invest for your children using an ISA in your own name – this way, they won’t necessarily get access to it once they turn 18. Even small, regular contributions can grow significantly over time.
6. When Should I Start Planning for Retirement?
The sooner, the better! Compound interest works in your favour the earlier you start. If you’re employed, ensure you’re making the most of your workplace pension contributions – many employers match a percentage of what you put in, effectively giving you free money.
7. How Do I Choose the Right Insurance Policies?
Start with the essentials: life insurance, income protection, and critical illness cover. Tailor each policy to your circumstances – consider factors like dependents, income, and lifestyle. Review your coverage annually to ensure it still meets your needs.
Need More Personalised Advice?
Every financial journey is unique. If you have more questions or want tailored advice, reach out to our qualified advisers at Universal Finance. We are committed to making a difference to your financial future!
