Tips For Managing Your Finances Responsibly.
Learning to manage your finances responsibly is a vital life skill, yet how many of us easily become overwhelmed with the range of bills we have to pay every month?
To start managing your finances responsibly you must work out where your money is being spent each month.
To begin taking control of your finances draw up a weekly or monthly spending chart. Divide your income into categories, such as;
- Household bills
- Family living expenses
- Financial services (insurances, pensions etc.)
- Spending on friends & family
- Travel & leisure
Using these categories is a useful way to discover where your money is being spent, and can act as a helpful tool when trying to decide how much you should be spending in each area. Don’t forget to include any regular ‘special’ payments such as; Christmas gifts, or holiday payments.
Try starting a spending diary
Once you know how much your income is, and where your money is going every month then it’s easy to see if your outgoings are higher than your income. If you do find that you need to start cutting back on your spending then it can be a helpful practice to start a spending diary.
A spending diary is a record of every purchase you make over the course of a month. Make a note of everything you buy. Even small purchases such as, cups of coffee or magazines, these can all mount up and eat into your income.
Manage your debts
If you have been consistently spending more than you earn for a while then it’s probable that you already have multiple debts, maybe credit cards, or store cards, perhaps a personal loan from the bank.
Once your spending is under control it’s time to start thinking about paying these debts back. If you owe money on several cards then you should always start by paying off the one with the highest interest rate first. This is the quickest way to clear your debts. Once you have cleared the first card you can move on to the next one. Remember that even if you are concentrating on just clearing one card, you still have to make at least the minimum payment on all of your cards.
If you are really struggling with debt and finding it very difficult to make any real savings on your monthly outgoings then it is worth seeking professional help. You should always ask for help as soon as you begin to struggle with debt. The longer you wait the worse the debt will become. If you start missing payments on your credit cards or loans, deal with it now, before the situation worsens.
Plan to save
If you successfully take control of your finances you may have some extra cash available that you didn’t expect. It can be tempting to increase your outgoings to match your income, but that’s not a good idea. Now is the time to start saving. By putting money aside today you will have funds available when you need them. In an emergency situation you need to know you have something to fall back on. If you are unable to work for any reason, or your home unexpectedly needs major repair then having the money already available is a great relief.
The next steps
Once you have a sufficient emergency fund established you can move on to think about future saving goals.
What will you want to spend money on in the future?
- A holiday
- A new car
- A new addition to the family
Whatever your goal, start saving now. Plan to save money each month, having a fixed amount transferred to your savings account automatically can make saving easier as it avoids the problem of inertia that prevents many people from saving. If you can’t make the payments automatically, try to transfer the money as soon as you get paid. If you wait you will find something else to spend it on instead of saving it.
Check on your savings account regularly. Make sure the interest rate stays competitive, and increase the amount you are saving whenever you can.
Following these tips will ensure you can manage your finances responsibly, and keep your family safe for the future.