In the UK, when you take your car to the garage for annual maintenance and to check everything is how it should be, they call this an MOT. Therefore, a financial MOT is a check-up on how your finances are performing. Are you on track to meet your money goals and are they working best for your situation?
There is no real financial MOT with set tests to complete or a pass mark. There isn’t even a requirement to complete one like there is with a vehicle MOT – but that doesn’t mean you shouldn’t.
Why Complete a Financial MOT?
Completing a financial MOT could provide one or multiple benefits. It may help you to:
- Retire earlier
- Apply for credit successfully
- Get a mortgage when you need one (check the beginners guide to this here)
- Make the best of your money with wiser investments
- Make a big personal purchase
- Avoid debt, get out of debt or improve a bad credit score
If you want to do any of these, a fanatical MOT is going to be worth your time.
But how often should you analyse your finances? You should do a financial MOT if you have never done one before or know you need to make a credit/mortgage application within a few years. But you may want to keep up your monitoring as often as you can to make your money go further.
3 Top Tips to Pass Your Financial MOT
As mentioned earlier, this is not a real test but more of a personal analysis of how you manage your money and investments. But if you want to feel better about your finances after carrying out an analysis, there are things you should start doing right now. Here are three tips to ‘pass’ your financial check-up:
#1: Start Saving Every Month
Sounds simple, right? Well, you may be surprised to hear that Forbes recently reported 23% of Americans had no savings to lean on during COVID-19. And almost the same number only had enough kept away to get them through three months.
If you fall in either of these categories, it is time to start saving every month. Even if you save just a little, it can go a long way over the years. For top tricks to do this, check out this guide on how to save money monthly by Wonga.
#2: Investment Opportunities and Building Credit
Saving is good – but investing and saving smart is better. Once you have some money put away, you may want to consider where that money will work best for you. This means looking at savings products, ISAs and maybe even stocks or shares. Although the latter options should always be done with specialist advice and knowledge of the risks involved.
You also need to look at ways to build your credit score through regular timely payments for bills and keeping to other credit agreements. This is key if you want a mortgage in the near future.
#3: Create a Monthly Budget
A monthly budget will enable you to analyse your household spending and identify areas where you could save more. The biggest error people make when making a budget is that they make it but don’t update it every month. Only by constant monitoring can they truly understand their spending habits and opportunities for better spending