A money makeover is a comprehensive assessment and overhaul of your financial situation. Whether you’re trying to get out of debt, save for a big purchase, or simply take control of your financial future, a money makeover can set you on the right path. NMTBP show you how to do it in a systematic and effective way

Assess your current financial situation

Net worth calculation: Start by calculating your net worth, which is the difference between your assets (what you own) and liabilities (what you owe). Include everything from savings accounts, retirement funds, and property to credit card debt and mortgages

Cash flow analysis: Review your monthly income and expenses. This will give you a clear picture of where your money is going and help you identify areas where you can cut back

Set clear financial goals

Short-term goals include building an emergency fund, paying off credit card debt, or saving for a vacation. Short-term goals typically span from a few months to a year

Medium-term goals might involve saving for a down payment on a house, purchasing a car, or funding a small business. These goals usually have a timeline of 1-5 years

Long-term goals are often related to retirement or involve significant life changes, such as funding a child’s education. They have a timeline of five years or more. Make sure your goals are SMART: Specific, Measurable, Achievable, Relevant, and Time-bound

Create a Realistic Budget

Track your spending: Use tools like budgeting apps or spreadsheets to track every expense for a month. Categorise these expenses to see where your money’s going

Prioritise essential spending: Allocate funds first to essential categories like housing, food, utilities, and debt repayment

Allocate for savings and goals: After essentials, allocate a portion of your income towards your savings and financial goals. Aim to save at least 20% of your income, if possible

Tackle debt strategically

Debt snowball method: Focus on paying off your smallest debts first while making minimum payments on the larger ones. This method is motivating as you see debts eliminated quickly

Debt avalanche method: First, focus on paying off the debt with the highest interest rate. This method saves you more money in interest over time

Consider debt consolidation: Consolidating multiple high-interest debts into a single loan with a lower interest rate might make sense. This can simplify payments and reduce the total interest paid

Build an emergency fund

Start small: Aim to save £1,000 as a starter emergency fund to cover unexpected expenses like car repairs or unexpected bills

Grow over time: Gradually increase your emergency fund to cover 3-6 months of living expenses. This provides a financial cushion in case of job loss or other significant life changes

Invest for the future

Understand investment options: Educate yourself on different types of investments, such as stocks, bonds, mutual funds, and real estate. Consider speaking with a financial advisor to create a personalised investment plan

Start early: The earlier you start investing, the more time your money has to grow. Take advantage of compound interest by investing regularly, even if it’s a small amount

Diversify: Spread your investments across different asset classes to reduce risk. This could include a mix of stocks, bonds, and property

Review and adjust regularly

Monthly check-ins: Review your budget and spending every month. Adjust as necessary to stay on track with your financial goals

Annual review: Conduct a thorough review of your financial situation, including your net worth, debt, and progress towards goals, once a year. Adjust as life changes occur, such as a new job, marriage, or child birth

Stay motivated and accountable

Set milestones: Break down your financial goals into smaller, more manageable milestones, and celebrate when you reach each one

Find an accountability partner: Share your financial goals with someone you trust who can help keep you on track. This could be a friend, family member, or even an online community such as Debt-Free Wannbee 

Plan for the Long-Term

Retirement planning: Contribute regularly to retirement accounts, such as SIIPS and ISAs. If available, take advantage of employer matching programmes

Estate planning: Ensure your financial affairs are in order by creating a will, setting up trusts if necessary, and designating beneficiaries on accounts and insurance policies

A money makeover isn’t just about cutting expenses—it’s about transforming your entire approach to finances. You can take control of your financial future by taking a comprehensive look at your current situation, setting clear goals, creating a realistic budget, and making informed investment choices. Remember, the key to a successful money makeover is consistency and commitment. With time and effort, you’ll be able to achieve financial stability and peace of mind