Best practice, smart money habits
Does the idea of looking at your bank account cause a sense of dread? Does the ping of your banking app make you question every single one of your spending choices?
Taking the time to manage your money better can really pay off. Learning to budget will help you stay on top of your bills and save you a considerable amount of money each year. You might be able to use savings to pay off any debts, put them towards your pension, or spend them on your next car or holiday.
If you don’t know what and where you’re spending each month, there’s a good chance your personal spending habits have room for improvement. Smart money habits begin with spending awareness. Track your spending and identify how much you’re spending on non-essentials such as dining, entertainment and even that daily coffee. Once you’ve identified these personal spending habits, you can make a plan to improve.
Create a budget
Use your monthly spending habits, as well as your monthly take-home pay, to set a budget you know you can keep. There’s no use setting a strict budget based on drastic changes, such as never eating out, when you’re currently eating out four times a week. Create a budget that works with your lifestyle and spending habits. You should see a budget as a way to encourage better smart money habits, such as cooking at home more often, but give yourself a realistic chance of meeting this budget. That’s the only way this money management method will work.
Create an emergency fund that you can dip into when unforeseen circumstances strike. Even if your contributions are small, this fund can save you from risky situations in which you’re forced to borrow money at high interest rates or possibly find yourself unable to pay your bills on time. You should also make general savings contributions to strengthen your financial security in the event of a job loss.
Paying bills on time is an easy way to manage your money wisely, and it comes with excellent benefits. It helps you avoid late payment fees and prioritises essential spending, and it can also improve your credit score, enabling you to obtain more competitive rates of interest on a future mortgage or car loan.
Do you subscribe to services you never use, such as a gym membership? It’s easy to forget about monthly subscriptions to streaming services and mobile apps that charge your bank account even when you don’t regularly use these services. Review your spending for charges like these, and consider cancelling unnecessary subscriptions to hold onto more money each month.
Even if your ability to invest is limited, small contributions towards your pension and investments can help you use your earned money to generate more income for your future financial security. Write down all the things you want to accomplish throughout your life, then work out how much you need to set aside each month to reach your goals in the timeframe you want – then pay yourself this amount each month as if it is another bill.
Great money management skills
The path to better finances starts with changing your own habits. Some of these changes will be easier than others, but if you stay committed to this transformation, you’ll end up with great money management skills that will serve you throughout your life – and in the meantime, you’ll have more money in your pocket. To find out more, speak to us for further information.