Most people wish that they were better at money management than they actually are. The truth is that being “financially sound” is about a lot more than just making sure that you pay your bills each month. Fortunately, you don’t have to be a maths whiz or a millionaire to feel confident with your cash either. Sometimes, a few simple changes is all it takes to transform your life.
Life is much less stressful when you’re not spending as much of your time worrying about money. The better you handle your cash, the better your credit score, and the less debt you have to deal with. Here’s what you need to know about simpler money management.
Think Carefully Before Each Purchase
When you’re faced with an upcoming spending decision – particularly a large one, it’s important to think carefully about what it means to spend the money that you’re going to be handing over. Just because you might have the cash in your bank account doesn’t mean you should be spending it – particularly if it means that you have no emergency savings left to access.
Give yourself a “cooling off” period before each purchase of a few hours. You can use this time to think about why you need the item that you want to buy, and even look for cheaper places to get it online.
Stick to your Budget
A lot of people start the new year by creating a budget. Unfortunately, those budgets then end up shoved in a drawer somewhere, rather than helping you to make your spending decisions. Think of your budget like a blue print to better spending, it’s not going to help much unless you’re using it.
Keep track of your spending and update the budget you have as you continue to move through each month. Over time, you’ll learn more about your problem areas for spending, and where you need to cut back the most to transform your habits.
Give Yourself some Leeway
One of the reasons why people frequently stray from their budgeting goals, is that they put every extra penny left over when they’re finished paying for bills, into a savings account where they can’t touch it. While this strategy is obviously a great choice if you want to reach your financial targets as fast as possible, it’s not a great way to ensure that you stick to your spending targets.
Ultimately, you’re going to need a little freedom to have some fun with your money, otherwise you’ll end up falling off the wagon. Make sure that there’s a little cash in your bank account for “free spending” too.
Make Sure You’re Paying the Right Prices
Another reason that budgets end up getting ignored, is that people try to give up on all the things that they enjoy immediately to save some extra cash. While it’s true that you may have to compromise on certain things, try cutting costs in other areas first. For instance, could you be spending less on your insurance fees if you switched to a different provider? Is it possible to move to a new energy vendor, and cut down your monthly costs?
Even when you’re buying things like groceries and gifts for your friends at the holiday season, make sure that you spend some time comparing prices online to ensure that you have the best deal.
Avoid Committing to New monthly Bills
Once you’ve started to sort out a budget, try to avoid changing it too much by committing to new monthly bills. For instance, just because you save a little money on your Sky TV bill doesn’t mean that you should sign up to three new streaming services instead.
Of course, there are circumstances where a new monthly bill may be necessary. For instance, you might need to take out a loan for a car or a house repair. In those cases, simply make sure that you’re getting the best rates possible to cut down on your interest expenses.
Limit Credit Card Purchases
Finally, if you struggle with controlling your spending habits, then one of the worst things you can do is start relying on your credit cards. It’s usually all-too-easy to turn to a credit card when you haven’t got any cash left over, but this can lead to more problems than solutions. Avoid taking your credit cards with you unless you absolutely have to, and simply ignore them if you can.