There is a lot more involved in being good with money than simply being able to make ends meet. You sure don’t need to be a math geek to do it; in fact, fabulous math skills really are not necessary – all you need is to know how to carry out basic adding and subtracting.
When your financial skills are refined life becomes much easier. The way that you use your money has an impact on your credit score, as well as how much debt you are in. If money management does not seem to be your strong point and you seem to be living from one payday to the next despite earning sufficient money, these tips should help you to improve your financial habits.
When you find yourself confronted with a spending decision, particularly a large one, do not just presume that you will be able to afford it. Make sure that you confirm whether it is in your affordability realm and that you have not already designated the funds elsewhere.
This means making use of your budget, as well as the balance of your account to make a decision as to whether you can afford the purchase. Keep in mind that just because there is money in the account does not mean you can afford it. You also need to take into account expenses and bills that will come your way before your next payday.
Your Guide To Better Money Management
1. Always Have A Budget
A lot of people do not budget as they think it will be a boring chore to list out their expenses, add numbers up and ensure that everything tallies up nicely. However, if you are not good with money, there is no excuse for not budgeting. If all you need to get your financial situation back on track is to invest a couple of hours into budgeting each month, why would you not set that time aside? Rather than thinking about the process, focus on the benefit that budgeting will bring to your life.
2. Use Your Budget
Your budget is of little use unless you actually use it. Refer to it frequently throughout the month to help you in making spending choices. As you pay bills, make sure that you update your budget. At any point during the month, you should be able to judge how much money you can spend while taking into account the remaining monthly expenses.
3. Set Yourself An Unbudgeted Spending Limit
One very important part of your budget is the net income, in other words, what you have left once you take away your expenses from your income. Leftover money can be used for whatever you like, such as entertainment, but there needs to be a limit to this amount. if you go crazy with this amount at the start of the month, you will have nothing left as the month goes on. Before deciding on a big purchase be sure to check how it will impact other plans you have for the month.
4. Keep A Track On Your Spending
Little purchases add up pretty quickly and before you are even aware of it you find that you have overspent the budget. Track your spending so that you see where you are sending too much without realizing. Keep your receipts and keep a journal of your purchases, putting them into categories so that you can quickly see where you struggle to keep your spending in check.
Emotional and impulsive spending can quickly add up and take a large portion of your weekly paycheck. This is backed up by the therapists at Thinking Families who recommend to “write down how you were feeling each day and have a look at how that correlates with your impulse spending. Becoming self aware about how your emotions affect your spending behaviour will allow you to identify these behaviours in the future so you can determine if you should really buy that item.”
5. Be Careful About Committing To New Recurring Monthly Bills
The fact that your income and credit score allows you to qualify for a loan does not mean you should take it on. A lot of people are rather naive in thinking that the bank would not approve them for a loan or credit card if it was beyond their means. However, the bank is only aware of your income in the way you have outlined it to them and not other obligations you have that could make timely payments a challenge for you personally. You need to decide whether a monthly payment is affordable for you based not only on what you earn but also your monthly obligations.
6. Ensure That You Pay The Best Price For Everything
To make the best use of your money be sure to carry out comparison shopping to ensure you are getting the best price. Look out for cheaper alternatives, discounts and so forth.
7. Save Up If You Want To Make A Large Purchase
You will find you can manage your money a lot better if you can delay gratification. Instead of giving up the essentials or using a credit card to make a big purchase, put off the purchase until you can evaluate whether it is necessary and compare all available prices. By saving up instead of using credit you avoid the need to pay interest. As well as this, if you save instead of potentially missing timely bill payments you have one less thing to worry about.
This includes paying for new items on credit cards or delayed payment options. This is reinforced by the money experts at Metro Bookkeeping, who say that “with a lot of new payment options out there now that allow you to spread your payment over a few weeks are good in theory, but they can quickly stack up if you make multiple purchases. Make sure you are aware of the total sum of the weekly payments that you are committing to, and ensure that they won’t exceed what you can afford.”
8. Set A Limit For Credit Card Purchases
If you are a bad spender, a credit card is your worst enemy. When your cash runs out you simply hand over the credit card without thinking about your bank balance and your affordability. Do not be tempted to use your credit card for purchases you do not need or cannot really afford.
9. Set Up Regular Savings Contributions
You can build good financial habits by depositing money into a savings account every month. It’s even possible to set this up automatically so that it leaves your checking account and goes into your savings account. This means you won’t need to remember to transfer it over each month.
You want these contributions to become a habit, so that you maintain consistency. The healthy lifestyle experts at Living Consciously, say that “habits take time to stick and can be difficult to remember to implement when we are just living our life the way we are used to. Luckily, technology can help us form this good habit with scheduled payments. That way, you won’t be tempted to put less into your savings each week.”
10. It Will Take Practice To Become Better At Managing Money
When you initially start you may not be used to planning your purchases and putting off purchases that are not within your affordability realm. However, the more you incorporate these habits into everyday life, the easier it will become to manage your money and the more financially better off you will become. Once you have your budgeting and spending down pat, you can put greater focus on meeting your goals for the future, such as wealth creation or reducing previous debt.
Angelica Hermann is a passionate freelance writer based in Sydney. She is a university student and has a major in Philosophy. Angelica loves to travel. She goes to several tourist destinations whenever she’s free. She is also passionate about animals.