Having a firm grip on finances can feel like walking a tightrope a lot of the time, and something very simple may throw your money budget out of rhythm and cause problems. Improving your finances when you’re already in trouble is very difficult to achieve, and it can often feel like you’re only ever paying off what you need to with no hope of having spare money.
Taking active steps as soon as possible to take better care of your money will ensure that you’re in a better and healthier situation in the long run. Here are 6 tips for doing so.
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1. Form a Monthly Budget
If you don’t have a clear understanding of how much money you have spare every month and how much your outgoings actually are, this is only going to increase the risk of overspending. What this could mean is that you start to face problems that only get worse with time. Forming a monthly budget doesn’t mean that you’re disallowing yourself personal spending or treats; it simply means knowing how much you have spare and how much you can afford.
When forming a monthly budget, you should think about:
- Your non-negotiable outgoings. This is in the realm of rent or mortgage payments and utility bills.
- Your negotiable outgoings. This could be outgoings you have, but which can be canceled if you’d rather not pay for them that month (or cannot afford them). This could be areas such as subscription services or gym memberships, which can be canceled.
- Possible extra spends. These are areas that you cannot specifically account for in terms of how much it’s going to cost, but which are expected. An example might be car fuel.
- Your spare cash. This is how much you have leftover after you’ve accounted for all expected expenditures. You can then plan how much you have spare for each week of the month so that you can better plan social outings, personal savings, or personal treats.
Remember, a monthly budget doesn’t have to be the same every month. It may change month by month, as one month you may have more spare money, or perhaps a break in outgoings. Understanding your money month by month is highly encouraged.
2. Set Up An Emergency Fund
Not only is an emergency fund good for your financial situation, but it’s also good for your peace of mind. You can eliminate a lot of stress by simply knowing that you have an emergency sum put aside should anything happen unexpectedly.
This is especially helpful if you have a vehicle that may need repairs or if you have any household issues which may need fixing, like heating problems during the winter months if your boiler is on its last legs.
You can start saving for an emergency fund at any time, and anything is better than nothing. Try to make an emergency fund separate to savings account you may have, so you don’t risk spending any of it.
3. Making Saving Part of Your Monthly Outgoings
It’s much easier to save if you view saving as an obligatory outgoing. Set up a saving amount to be transferred into a separate account every month, the same as you would any other bill. If you plan for a certain amount saved every month and put this money aside on payday, then you can comfortably know that what is left is spare money for you to spend after good savings habits and bill payment.
4. Avoid Paying for Large Amounts on Credit Card
Credit cards are extremely handy in emergencies, but they should only be used as long as you know that you can comfortably pay off any outstanding amount, and in a short space of time. Credit card debt can easily rack up and snowball into problematic financial situations where you may find it impossible to pay off the outstanding balance.
If you find yourself in a serious situation with credit card payments, you can find assistance for those seeking debt relief and get better control of the situation.
That being said, credit cards used responsibly can help you to build a positive credit score. If you make very small purchases using a credit card — for example, a quick $5 purchase — and then pay it off, this can help to build a good reputation and improve your credit.
5. Try Not to Pay on Card If You Can Help It
It’s so easy to overspend when you’re paying via your bank card for everything, especially during busy days out, on the go, or during trips or vacations. You only view the damage afterward when you check your bank statement, and there is nothing you can do about it by that point.
By using cash instead, you can ensure you only draw out of the bank the amount which you can comfortably spend. As you can physically see it going down in your wallet as you make purchases, you will be able to keep better track of what you are spending and how much you have left.
When the money in your wallet is gone, you know that you have used up the budget you had set aside for yourself and can avoid spending anymore.
6. Take Your Time With Purchases
Whether big or small, take the time to step back or sleep on it when it comes to buying something. You don’t have to devoid yourself of treats altogether, but this way, you can ensure that what you do buy has more meaning and necessity for you, instead of impulsive and frivolous purchases which may eat away at your money.
Adopting a more minimalist lifestyle can help with this mindset, too, as this will ensure you only have the very basic of what you want and need without over-cluttering.
If you can’t afford something yet, but you’re sure that it’s the right purchase, then take your time to save up for it, and you will be more grateful in the long-run.