Managing your money effectively is an ongoing challenge for every one of us. It is so easy to simply waste money these days through poor habits and careless spending. We want to suggest 5 habits that can transform the management of your finances. Keep a clear focus on your money We’re not asking you to agonise over every cent that you spend. However many of us simply spend money without any thought as the need or desire arises. Instead set yourself some financial goals over different time frames. Some might be important long term goals such as retiring early or buying a second property. However some should also be around simply living within your means or reducing wasteful spending. The key is to give yourself rewards along the way, if working towards your goals results in better financial practices. Maybe saving a little extra each month deserves a nice weekend away later in the year? Have a goal, track your progress and work towards it throughout the year. Having a picture of the goal in your head will help to keep you motivated to continue the new better practices. Put yourself first (financially) One of the biggest barriers to saving is when you decide to save whatever is left at the end of the month. What happens in reality is that you mindlessly fritter money away and end up with very little to save at month end, if anything at all. Why don’t you pay yourself first? Identify your desired saving amount and set up a direct debit for this amount to come out of your account immediately after payday. You can always dip into your savings if you run out of money before the end of the month. This is a far more effective approach than saving little or nothing in the first place.
Spend less than you earn While it’s often not easy, we’ve all got to live within our means, keeping our expenses below the level of our income. While this mightn’t result in the luxurious lifestyle you want, living beyond your means is only going to store up a whole host of trouble for the future. Put away the credit card and hunker down financially if needed. Your future self will thank you!
Build a nest egg Life doesn’t go in straight lines and nor do the calls on your money. Things happen that require cash quickly – a sickness, urgent repairs, a helping hand for someone. Don’t have all of your money tied up in properties and other long-term investments, instead keep some of your wealth in cash, funds or other areas that you can access quickly. This avoids financial stress being added in difficult situations.
Reduce your debts Easier said than done, I hear you say! But there are different ways of reducing your debts, so why not have a think about the best way for you? Maybe you should negotiate better interest rates, pay off high interest rate debts first or use the “snowball effect” to pay down your smallest debts first – giving yourself a few quick wins! As the saying goes ‘every little helps’.
Is it time to transform your relationship with money through better financial habits?