How to Get Your Finances Under Control
Managing your money can be tricky and it is easy to become stuck in a negative cycle of debt if you are not careful with your spending. Even if you are not in debt, getting enough money together to achieve large financial goals such as buying a house or a car, or even just building up a rainy-day fund, can also be difficult. Luckily there are a few steps you can take to help get your finances under control and enable you to live comfortably. To kick you off, here are some of our top pieces of advice.
The first step to take is to learn as much as you can about personal finance. Of course, you don’t need to become an expert, but having a good grasp of the basics will help you to make more informed decisions about savings, investments, loans, and other financial matters. Read books, read blogs, watch videos. If you have a friend or family member who is particularly adept at financial matters, you could always ask them if they would be willing to give you a quick crash course. It might not be the most exciting subject in the world, but it is one that will continue to prove useful throughout your life. Even understanding the contracts that you are signing will become easier once you know what all the jargon and technical terms mean.
Make a budget
To take control of your finances, you firstly need to know exactly where your money is currently going. That means making a budget that tracks all of your income and outgoings, so you can see where you might be able to make savings and set yourself a spending limit. You can do this on pen and paper, make a spreadsheet, or use an online calculator like this one on Investopedia. It is well worth taking the time to do this – you might be surprised by what you learn about your spending habits. It also helps you to be more specific with your money goals. For example, ‘spend less on food’ is vague and hard to quantify or stick to. On the other hand, giving yourself a specific spending limit for your weekly grocery shop is much more actionable.
Pay off your debt
An effective way of gaining some financial freedom is to pay off any debts that you have. Debt consolidation is one option, for example if you have a lot of different credit card debts that are getting difficult to manage. According to consumer finance experts CashLady, “debt consolidation can be useful as it can combine all of your debts into a solitary payment, but it could also help you improve your credit score if it means you are now making your repayment in full and on time each month. You could even pay less in interest – as long as the APR of the consolidation loan is lower than the combined APR of the debts”.
Alternatively, if you only have one source of debt, then you can concentrate on paying it off quickly to reduce the amount of interest you have to pay overall. For instance, you could round up your monthly payments or make additional payments when you have spare money. Just make sure to check the specific terms of your loan or credit agreement first, because some will charge you a fee for overpaying or paying off the full amount early.
Reduce your outgoings
Lowering the amount of money you spend is key for getting control of your finances. There are many ways you can attempt to do this, including cooking at home instead of eating out, canceling subscription services that you no longer use, and trying to use less water, gas, and electricity at home (which is good for the environment too!). Paying with cash and with debit cards instead of credit cards can also be a helpful tactic here, as you won’t be able to spend money you don’t have.
Another trick is to always wait a day before purchasing any non-essential items – this will help you to work out whether you genuinely want them or not. Make the most of any loyalty schemes that you are a member of and switch to cheaper brands in the grocery store. In the majority of cases you won’t even be able to tell the difference! It can also be helpful to shop around when you are renewing your phone contract or any insurance you have, as well as looking into swapping your gas or electricity supplier.
The idea of saving up enough money for a house or a comfortable retirement might seem intimidating, but over time even small amounts of cash add up. A good trick is to set up an automatic transfer from your current account to a savings account that comes out just after payday, so the balance builds up without you even noticing. Tracking your progress with an app is another helpful tactic, as you get satisfaction from watching your savings grow and this in turn encourages you to save more. Even if you can only put aside a very small amount of money each month, if you stick at it you will soon see a meaningful difference. Having an emergency fund will also give you peace of mind, because you know that if something unexpected happens, such as you lose your job or your car breaks down, you will have a financial safety net in place to help you out.
Boost your income
As well as spending less, earning more is a good way to have extra cash left over each month. Whether it’s picking up a few extra shifts at work, starting a side business based on your hobby or passion, or boosting your skills so you can apply for a promotion, there are many options out there to explore. You could also consider selling some of your old and unwanted items online, both to make some spare money and to get rid of some of the clutter in your house. Thanks to all the digital advances in the last few years, it is now easier than ever to make money from home with only a laptop and an internet connection. Just make sure that you don’t work yourself too hard – your wellbeing should always be your top priority and will also help you to deal with your finances in a calmer way.