Tips for managing your money, knowing how to manage your money is a highly important skill that will make your life less stressful and enable you to live more comfortably. Here are some essential tips to help you overcome your money problems and get your finances in order.
First of all, work out what your short term and long-term goals are for creating a budget? It could be to stay on top of bills, pay for your children’s education, save for emergencies or save for a holiday or a house deposit.
Understand Your Expenses
The majority of people are unaware of how much money they spend each month. Not being aware of how much money you are spending can result in becoming problematic. An easy way to fix keep track of your expenses everyday by writing down and keeping a record of everything you purchase. For example; groceries, restaurant bills, utilities and everything else. Remember to keep track of expenses paid by cash as well as credit cards.
Understand Your Income
Although the majority of people are unaware of how much money they spend each month they usually do know how much money they earn each month. Most people know their full monthly income but have much less knowledge of their full monthly expenses.
Nonetheless, the point is to figure out your total expenses and subtract that from your total income for the month in question. Here are how the results should pan out:
- If you end up with a negative number this means you spent more than you made. Actions to take? Reduce your spending and expenses until the total reaches zero.
- If you end up with a positive number this is good (high five!) and means you spent less you made. Actions to take? You could increase your debt payments or increase your savings.
As soon as you have a better understanding of your expenses and income and have a firm understanding of the money coming in and out of your life, it’s time to take some additional steps and tips for managing your money.
Start Your Savings Journey as Soon as Possible
Don’t just focus on the usual life wishes, for example; purchasing a house, holiday, car etc. When you switch focus from saving money for “a thing” to always growing your savings in general, your financial future is automatically getting better.
It is a wise idea to pay yourself first and prioritise saving for two very important expenses; a retirement fund and an emergency savings fund.
The older you get, the more money you need to sustain your lifestyle and expenses. The older you get the harder it is to get another job should the worst happen. Creating an emergency fund is crucial and a Money market account/fund or a high yield savings account are the best options for storing it.
Prevent Making Impulsive Purchases
Retailers are very skilled at enticing customers to make impulsive purchases with end-of-aisle products, two for the price of one deals and other add on specials. Online you are likely to see adverts for items you have purchased previously, wherever you go online. Marketers and merchandisers make it very easy to fall into bad habits and get caught up in a cycle of making impulsive purchases that are hard to stop. To save money efficiently, you need to try your best to commit to no longer making anymore impulsive purchases. Here are a few changes and tips that can help:
When you go out, leave your credit card at home. This reduces the temptation to make sudden purchase and it gives you some “cooling off time” to think more carefully about whether you really need to buy a product.
Before you go shopping, first write a list of what you need to buy and don’t buy anything that’s not on that list. It would also be wise to give yourself a ‘play money’ limit. A limit for all non-essential purchases or expenses. It doesn’t need to mean you can’t do fun stuff that you like, all it simply means is that fun spending is not a daily random habit and it must have limits.
Don’t visit a shopping centre unless you really need to. This can really cut down impulse spending and after a couple of weeks, you might not even notice the lifestyle change. It would also be wise to eat a meal at home before you go to the supermarket. When you are shopping for food, a full tummy means much less temptation to buy extra treats.
Increase Your Savings When Your Income Grows
Whenever you receive a salary increase, before you do anything with the additional money, it would be wise to increase the amount you save. Preferably you should save at least the same percentage as your raise. Therefore, a 5 percent salary increase means a minimum 5 percent increase in how much you transfer into your savings. If you can increase that further, it would be wise to do so, before you get used to spending the extra income from your salary raise. These are some of the useful tips for managing your money.