How To Effectively Manage Your Finances
Finances can be tricky to manage and dealing with budgets, debt and trying to save can often feel overwhelming. But, managing your money properly can get you into a good financial position, increase your credit score and help to secure your future. In this article, we’ll look at how you can effectively manage your finances in just a few simple steps.
Getting your finances in order
The first stage involves understanding exactly what your incomings and outgoings are each and every month. Equipping yourself with this knowledge will make it easier to plan, budget and take control of your money.
Make sure you take into account bills, rent or mortgage payments, food shopping and travel costs. You’ll also need to consider any loans you might have, including online loans and credit cards, so you can develop an effective budget plan.
This will help you see where you spend most of your money and can even flag any frivolous spending that can be easily cut back on. If you find that your outgoings outweigh your incomings, you’ll need to work out a plan to reduce your spending. Simple suggestions include walking instead of taking the car, where possible, taking your lunch to work instead of buying from the café, or reducing your nights out.
Set up a budget
Once you know your total income after essential outgoings and expenditures, you’ll be able to create a budget. Allow yourself a set amount to spend on non-essentials or luxuries such as eating out once a month, a night at the cinema or an occasional treat. Not factoring this spending into your budget is unrealistic but setting yourself a reasonable and affordable limit will help you stay on track.
It’s important to consider any big events in your budget such as Christmas, weddings, birthdays or holidays. Planning ahead will help you save and limit any unexpected costs. If you use credit or debit cards for most of your spending, you might find it useful to make note of your transactions throughout the month, so you know how well you’re sticking to your budget.
It’s not easy to save money, especially with high food costs and the increase in bills. However, putting even a small amount away each month will contribute to positive financial health in the long term.
Start small and set a realistic goal so you don’t become disheartened. Once you’ve paid off any outstanding debts or loans, you can increase your savings amount each month.
Managing your finances can be stressful, particularly if you’re struggling to keep up with payments or afford everyday essentials. If you’re feeling like you’re not in control of your money, it’s important to seek advice from your bank or from a specialist charity such as Citizens Advice.