Managing your finances might not be the most thrilling idea to come to mind, but it is, unfortunately, a vital part of life. Indeed, you wouldn’t be alone in feeling a little overfaced by the concept of financial management; financial literacy is relatively low across the country, and financial anxiety particularly high. What are some simple steps you can take to effectively manage your finances?
Make a Budget
Every good financial management plan starts with a budget – and yours should be no different. There are numerous reasons for which a budget is a shrewd first move: first, you gain a clearer understanding of your present financial situation; second, you can identify key pressure points in your present financial situation; third, you can identify the upper limits of what is possible with your current circumstances.
Start, then, with your income. How much does your household bring in each month, including any ad hoc work, side hustles or re-sale of household items? Separately, how much does your household cost to run, including utilities and food costs? Finally, how much do you spend on leisure, and how much do you save? With all this information, you can come up with useful averages for the amount you are left with each month – as well as a ceiling for how much you could save currently.
Manage Your Debts
Whatever your financial goals happen to be, controlling debt should always be your first port of call. Unintended debts indicate chronic overspending, unmanaged debts can quickly balloon in size, and unpaid debts can affect everything from the efficiency of your savings to the strength of your credit score.
The real killer is having multiple sources of debt at the same time. It can be difficult to prioritize one over the other, and the combined impacts of different interest rates can be ruinous. Using a debt consolidation loan to simplify your repayments can make climbing out of debt that little bit easier, giving you the space to re-organize your budget and plan for the future.
Track Your Spending
It is at this point, then, that tracking your outgoings becomes especially important. Every penny counts when it comes to financial management, and especially so when climbing out of debt. This means you need to get granular with your expenditure, from unnecessary subscriptions to impulse grocery shopping purchases.
Tracking your spending in a spreadsheet makes it easier for you to spot unnecessary spending, though some modern banking alternatives can automatically label transactions according to type and place. With this data, you can crack down on money going out and create better long-term habits.
Build Up Savings
All of this is with a view to securing long-term financial wellness. Any ‘spare’ money generated by these shrewd financial decisions should first go to an emergency fund and then into a high-interest savings account. You may even use something like a Stocks and Shares ISA to benefit from interest-beating positive market movements – though the risk involved is higher here.
markmunroe
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