The thing with financial management is that we all hypothetically understand how to take care of our money, but, in real life, many of us struggle to choose the smart option.
Maybe you want to save money but you end up splurging on luxuries. The point is that many people could have much better financial situations if they got their money in order.
You just need to change your spending and saving habits. It’s about forcing yourself into being a little more disciplined. That doesn’t mean you’re not allowed any luxuries; it just means you need to know what you can and can’t afford.
Here’s how to change your relationship with your finances.
#1 Get your basic expenses in order
The first step in forcing yourself to better financial habits is to organize your basic expenses. You need to budget strictly. If you can keep track of your expenditures then you won’t have to worry about spending more than you earn.
You just need to make sure your monthly budget takes into account all of your necessary expenses. If you sign up for a contract with a new energy provider or get a new phone plan then you need to account for the change in your monthly spending.
If your budget seems to show that you’re spending too much and saving too little then you should look for ways to start reducing your basic expenses.
And this doesn’t mean you need to cut down on the things you need. It just means you need to pay for them in smarter ways. For instance, you could save money on your online food shop by using coupons and discount codes at different supermarkets.
Do some Googling and you’ll find that there are always plenty of deals out there. You could get the same food for less money. As for your utility bills, you might want to reduce your energy usage by getting thicker glazing for your windows and insulating your walls.
There are plenty of ways to reduce your basic expenses without giving up on the essentials.
#2 Build up a respectable credit rating
Building up your credit rating is another smart financial habit to develop. With a better credit score, you’ll get better interest rates and loans for the things you need in life (e.g. a down deposit on a new house or, perhaps, a new car).
Obviously, you should avoid accumulating too much debt, but manageable debt can be good for your credit rating. If you can afford to pay back a loan in monthly installments then you’ll start to build up good credit.
Given that most of us have debt from our university days and mortgages, it’s good to keep on top of those payments so as to improve your rating.
And you might want to do some research on the topic of good credit card APR, too. Credit cards with good interest rates are important when it comes to protecting your money. You need to build up good credit, but you should do so in a fiscally responsible manner.
#3 Set up a standing order (to you)
One of the best ways to force yourself into better financial saving habits is to set up a standing order for yourself. If 15% of your monthly income is automatically sent to your savings account on payday then you won’t have to worry about accidentally spending your funds before you can save them.
You should also make sure it’s a savings account from which you can’t withdraw money (until a future date). This is a smart way to ensure that your money is protected and you aren’t tempted to dip into your funds for luxuries.
So what are you doing to force yourself into better financial habits?