Saving the pennies: How to turn your finances around at any age

Financial problems can strike at any age, whether it’s running up huge debts in your twenties, being made redundant in your thirties, or going through a punishing divorce in your forties.

The good news is you can turn your fortunes around at any stage – but the earlier you tackle it the better.

Here we take a look at common issues people encounter at different ages – and ask the experts for their tips on how they should be tackled.

Twenties

Getting into serious debt this early in life can be crippling. It can affect your longer-term credit rating and your chances of getting on the housing ladder.

The first step on the road to recovery is understanding the size of the problem and what caused it, according to Adrian Lowcock, an independent financial adviser.

“Create a list of all the debts and the interest rates being paid on each,” he says. “Then look to pay off the worst offenders through your earnings or possibly by consolidating debts.”

You also need to avoid problems recurring. Stop using expensive credit and store cards – and then put a proper budget in place.

“Start with how much you need to spend on essentials, such as rent, and work out what’s left for fun and treats at the end,” he says. “Only spend what you can afford.”

You can discuss serious debt problems with charities such as National Debtline, StepChange and Citizens Advice.

Thirties

This can be a challenging period. For many people, it is the decade in which they get married, buy a house and have children. This can leave you financially stretched, warns Sarah Coles at Hargreaves Lansdown.

“You can face debt nightmares as you have so many demands on your income,” she explains. “If you have a young family, you may be dealing with a lower income at the same time.”

Having a high mortgage can leave you particularly vulnerable to being out of work – particularly if you are self-employed – as well as falling ill and being unable to earn.

“The most sensible first step is to draw up a budget of everything you have coming in and everything you spend in a typical month,” she adds. This will show you exactly where you stand.

“Then look to either cut costs or boost your income. For example, you might be able to start a part-time business from home to earn some extra money.

To help safeguard against future problems, consider an income protection policy, suggests Scott Gallacher, director of Rowley Turton private wealth management.

“It’s an extremely valuable insurance,” he says. “State assistance if you are unable to work due to ill-health is sadly very poor and people need to make their own provision.”

Forties

Major lifestyle changes can happen at any time but the forties is the most common age for divorces among different sex partners to take place, according to the Office for National Statistics.

Depending on nature of the split, this may mean having to start afresh – potentially in rented accommodation and with a depleted pension in later life.

Such lifestyle changes are financially and emotionally stressful for everyone, Lowcock says.

“Focus on getting through the change. While saving for retirement and the long term is generally good advice, sometimes it is more important to focus on the here and now.”

While you’re getting settled into your new life, it makes sense to cut expenditure as far as possible and put as much money away as you can.

He suggests reducing pension contributions in the short term to give you some flexibility. “Cashflow is critical as it gives you options,” he adds. “Focus on your immediate situation.”

Then look to the future.

“It can be hard to adjust but the key is to consider what matters most to you, and what makes you happy,” he said. “You then need to focus on achieving those goals.”

Fifties

What happens when you hit your fifties and realise you have no retirement provision in place? This can often happen if you’ve been self-employed and overlooked longer-term planning.

The simple answer is to start saving immediately, according to Ben Yearsley, investment director at Shore Financial Planning.

“Don’t panic, but the sooner you start the better,” he says. “Work out how much spare cash you have each month and begin investing in a pension.”

If you don’t think you have any spare cash then scrutinise your monthly spending to see where savings can be had that can be invested.

“Don’t forget pension contributions get tax relief at effectively your marginal rate (for most this will be 20 per cent or 40 per cent),” he said. “Even if you aren’t working, but your partner is, you still get a small annual allowance that attracts tax relief too.”