With January 2020 now in full swing, many of us will have started New Year’s resolutions. Whether it’s dry January, losing weight or learning a new skill, a lot of us will have started (or stopped) a new habit this year.
One of the most common goals we make for ourselves is to do with our finances. Money can be one of the biggest causes of stress in our lives on a day-to-day basis. Moving house might be considered the most stressful thing we can do, but that’s all wrapped up in mortgages, borrowing, lending and the bottom line of our bank accounts.
It’s all too easy to make vague resolutions… ‘This year, I’ll be better with money,’ something we’re all guilty of.
Well, below you’ll find some 5 easy tips on how you can find yourself in a better financial position without getting stressed.
1) Make a Budget
Okay, okay, so feeling good about your finances does start with putting in a little leg work, but it will be worth it in the end (and you can justify getting a new notebook to keep track of how financially sorted you’re about to be).
If you aren’t sure how to start making a budget, then following a simple guide will give you a great head start.
So many of us just spend what’s in our accounts without thinking about it until the money runs out and then find ourselves a week shy of payday.
Just knowing what’s coming in and going out of your account on a daily, weekly and monthly basis, when bills are due and then what’s left for you to spend is one of the most important ways of getting on track with your finances.
2) Don’t Be Too Harsh
If you regularly overspend and find yourself in a tricky financial situation, then it might be tempting to get militant and vow never to spend money again and give yourself a too-tight spending allowance.
Though this might work for a couple of very disciplined people, but most of us will just end up feeling frustrated with limiting ourselves so much.
Instead of tightening the reins unrealistically, give yourself a budget. 30% of your income is recommended as an allowance for spending money and should still be enough to let you carry on with the things you enjoy.
3) Credit Rating
Credit rating – that thing that none of think about until we apply for a credit card, new bank account or some store card and get the big “NO” due to our credit rating. The mythical rating that watches all of our incoming and outgoing payments and really knows when we are in the red or the black.
It requires a bit of forward-planning but will be worth it in the end. You can improve your credit rating in a number of ways, and the only thing to remember is meeting the payment deadlines.
That’s easy enough to manage with direct debits and automated reminders you can set yourself via your phone. You can get a store card for purchases which you pay off every month or, if you’re planning for something bigger (like a home renovations or a special holiday), secured loans can be a great way of improving credit rating.
It’s up to you to make sure that you make the repayments on time but, if you do, then this can even improve your credit rating.
4) Mini ‘Coffee’ Savings
If you find it difficult to save and regularly put away a portion of your salary, you aren’t alone.
It’s difficult to save and you’ll hear a lot of different opinions from different people. Remember though not to feel bad if what works for your friends doesn’t work for you. We’re all different and that includes how we manage our money. But the bottom line is that, even if you don’t think you need a pot of savings for a wedding, holiday, or home renovations, the future is an uncertain place so it’s never going to hurt to have a little something tucked away to fall back on.
Try diverting a small amount of your finances, say, the price of a coffee, into a separate bank account every week. It’s so small you probably won’t even notice it going and those little amounts add up quicker than you think. If that’s all too easy, increase it to a couple of coffees. Before you know it, there’ll be an amount tucked away for a rainy day. Once that savings account isn’t sitting at zero, adding to the stash will feel more motivating.
5) Keep a Money Diary
But where does it go? If you, like most of the rest of us, suddenly find yourself looking at an empty bank account and have no idea how it happened, then consider keeping a money diary.
Has something you consider a treat turned into more of a habit?
Are direct debits coming out of your account for services you no longer use (gym membership, anyone)?
If that’s the case, then it’s worth writing down your expenditures on a daily basis for a week or two – and another great use for your new finance journal! Spending patterns and places where your money is disappearing will soon become clear.
If it still isn’t obvious where your finances are going, then it might be time to look at reducing your bills or looking at other direct debits coming out of your account.
Money is something so many of us worry about, and it can feel like it’s taking over our lives. But, with a little bit of thought, it doesn’t have to be such a cause for concern.