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9 steps to financial fitness

Financial fitness, or wellbeing, is about feeling comfortable and in control of your financial position.

It means having the knowledge and confidence to make the most of your money. Both on a day-to-day basis, and through planned and unplanned events.

Easier said than done, but here are 9 good money habits to put you on the right path.

Jump to:

Budgeting and spending

Borrowing and saving

Making financial decisions

Looking ahead

Budgeting and spending

1. Plan your spending

Like a balanced diet for your physical health, a budget can be the first step to better financial health. It helps you take control and decide where you need and want to spend. This will include essentials like your rent or mortgage payments, utility bills and transport and hopefully some things you enjoy. Our budget planner can help you see how you’re spending your money and where you may want to make changes.

The important part is to set aside time to forecast your spending often – each time you get paid, for example. There are plenty of apps that can help you do this.

2. Keep track of your spending

Creating a budget is relatively easy - sticking to it can be harder, so monitoring your expenses is vital.

Again, you can use apps to help. For example, our mobile app has a feature called Balance After Bills, which shows you how much you’ll have left once your regular bills and payments have come out of your account.

Being conscious of when and where you’re spending can help you keep it under control. It can also help you spot areas where you could cut back.

3. Spend wisely

No matter how big or small your budget is, not overspending is an important habit to get into. This is about knowing your limits and using your money wisely, so you don’t end up feeling guilty.

It means focusing your spending on essentials and things you really get pleasure or value from. For example, you can spend money on clothes or going out with friends if those are things you enjoy but include them in your budgeting so you won’t regret it later.

Explore: How to make good financial decisions

Borrowing and saving

4. Avoid borrowing for essential expenses

Borrowing money is not necessarily a bad thing. When used appropriately, debt can help you improve your finances.

For example, borrowing money to buy a house can lead to you being better off in future, as the house may increase in value. So long as you can afford to keep up with the repayments.

That said, you should avoid borrowing more than you need to. You want to avoid borrowing money for day-to-day essential expenses like food or bills, as this may lead to bigger problems - especially if you’re using short-term credit or overdrafts with high interest rates.

If you’re finding it hard to afford the essentials or have debts you’re struggling to repay, you can get confidential help.

5. Save money

If budgeting is the balanced diet of your finances, saving could be the exercise.

And, like exercise, little and often is a great way to start. You could set yourself a goal to save towards or aim to save a little extra each month to cover any yearly costs you have.

You could set aside money every time you get paid, or use an app to round up your spending and put loose change into a savings account. The key is to make it a habit. Having goals and saving towards tangible things is a great way to stay motivated. 

Explore: How to save money

Making financial decisions

6. Find the best deals

While you don’t want to be over-thinking or second-guessing every purchase you make, it’s well worth doing your research when it matters.

You can save plenty of money by shopping around. One idea is to review all your Direct Debits once a year and look around for better deals.

Online comparison sites can be a good place to start. But look for quality – both product and service – to ensure you’re getting value for money, rather than just the cheapest price.

Shop around and wait for deals on one-off purchases and consider when certain products or services might be cheapest. Flights are a good example - do your research into whether it's cheaper to fly on certain days, and how long in advance you should book to get the best price.

7. Choose the right financial products

Choosing financial products can be hard, given the volume and complexity of options. But, again, it’s worth shopping around to make sure you find the right products for you.

If you’re looking for a savings account, for example, the interest rate will of course be important. But it can pay to look beyond headline incentives to ensure a product will suit you. A savings account may have conditions on how much and when you can contribute, as well as restrictions on withdrawing the money. Don’t forget to factor them in.

You’ll also want to consider the reputation of the provider and the quality of experience and service on offer.

Take the time to fully understand products, including the terms and conditions. For example, when buying insurance, this might mean checking exactly what is and isn’t covered, rather than choosing based on price alone.

It’s good to get into the habit of periodically reviewing all your products and looking around for better deals.

Looking ahead

8. Prepare for the unexpected

Most of us experience the shock of an unexpected bill every once in a while. It could be something you didn’t see coming, like a problem with your house that isn’t covered by insurance. Or it could be something you forgot to account for, like renewing your car insurance.

It pays to expect the unexpected and the best way to start is to build an emergency fund - ideally, 3 to 6 months' worth of living expenses. This way, if something does happen, you’ll have savings to fall back on. 

Our emergency fund calculator can help you see how long it would take you to build up your emergency fund. You could use this to create a timeline to work towards. Or, if you need to build an emergency fund faster, you could see how much you need to be saving each month to reach your target.

9. Plan for the future

Flexible finances

We all have different ideas about what the future might look like. 

Whether you dream of taking a career break, setting up your own business or giving up work altogether, the more money you build up, the more flexibility you’ll have to do what you want. 

Start putting money aside as soon as possible. Whether you keep this money in a savings account or invest it will depend on your individual circumstances. This would include whether you have an emergency fund, the size of your goal, when you need the funds, and your attitude to risk.

Life beyond work

There are plenty of simple ways to prepare for life after work. If you can, make the most of a workplace pension. Your employer may even offer matching contributions, which means extra money towards your retirement.

The sooner you start, the better – even small amounts make a big difference over time. So set aside what you can and try to increase your contributions over time. 

Use our retirement calculator to work out how much you need to save to retire when you want, with the money you want.