Learning how to properly manage your finances is a crucial life skill – but it’s something that most of us simply don’t dedicate enough time to. If you can understand the basic of money management, you’ll quickly find that your life becomes a lot easier and much less stressful. The good news is that these ten tips from money management professionals could be enough to get you back on track with your expenses.
1. Know Your Cash Flow
The first step to good money management is understanding exactly how much you earn, and how much you spend. You can’t properly plan your finances until you have a solid understanding of what you’re doing with your money. Track your expenses with notes every day, and keep an eye on your wage slips too.
2. Think about your Lifestyle
Although we might all wish we had a super fancy car and big house, we can’t necessarily afford everything. When organizing your expenses, make sure you think carefully about your values and lifestyle. This will help you to make the best decisions about your future based on what’s most important to you. Set goals if you can, but be realistic.
3. Set a Basic Budget
Once you have a general idea of where your cash is going, you’ll be able to set a budget that’s more realistic, and easier to stick to. Often, people put numbers into their budgets that are based largely on wishful thinking. Instead of just guessing at where you are and what you want to achieve, make sure you make your budget based on real figures.
4. Always Practice Saving
Before you commit to big investments, think about how much money you have squirreled away for a rainy day. You don’t necessarily have to have thousands of pounds in your savings account, but you should be aiming for savings that amount to about 3 months’ worth of your regular outgoing expenses – just in case you hit a blip in your life that forces you to rely on your safety blanket. Your emergency fund can account for things like medical problems, job losses, and more!
5. Prioritise and Minimize Bills
While you’re practicing saving, think about taking a closer look at the bills you need to pay each month and decide whether there are any that might be for non-essential items, like magazine subscriptions, or television streaming services. Make sure that you’re always paying your essential bills easily before you start taking on any new ones.
6. Use Credit Cards Carefully
It’s important to remember that using a credit card isn’t necessarily the same as using cash. Your credit card can come with very high-interest rates and fees, and people can easily get into trouble with this kind of debt. Try to make sure that you’re using your credit cards as little as possible, and that you’re paying the balance that you accumulate in full each month. If you ever find yourself in a situation where you can only afford the minimum on your credit card, then you may be in some financial trouble.
7. Hire an Expert to Manage Taxes
Let’s face it, taxes are one of the most daunting areas when it comes to money management for many people. Tax codes can be incredibly confusing, and you may find that you’re not always getting the best deal for yourself if you do your own taxes. Make sure you think about using an expert to help you with your returns and always be sure that you’re finishing your forms on time.
8. Make Sure You’re Fully-Insured
Although paying out for insurance can seem like yet another big expense when you’re already struggling to make ends meet, the last thing you want is to find yourself in a dangerous situation without any cover. A car accident, theft, or fire in your home could lead to serious problems without any insurance, so think about getting covered well in advance.
9. Start Planning for Retirement Early
Another incredibly important part of planning for your future from a financial perspective is making sure you have enough cash for retirement. Saving for retirement is often something that people think they can ignore until a certain age in their lives. However, retirement is a life-long goal, and the faster you start saving, the more comfortable you’ll be in your old age.
10. Invest Wisely
Finally, when you’re just getting started with investment, it can be challenging as you simply don’t know how to spend your money. The best thing to do is speak to a financial advisor about how you should be spending your money, and what your “risk tolerance” levels are. This will give you a guideline for your investment future.
This is a commissioned post.