10 steps to better finances
Better finances are here again… or they will be soon!
It’s way past the New Year now and if your resolutions for health, money, life etc. are starting to fall by the wayside, take heart! You can pull it back. Getting better finances again doesn’t have to mean starting from scratch.
Don’t be overwhelmed, just doing one thing at a time can do wonders for your motivation and can really make a difference. Start with the smallest jobs and work upwards as you gather steam.
Spring into the rest of the year with a bounce in your financial step, by doing some or all of these ten simple things:
Know your numbers and your goals
What are your financial goals for better finances? If it’s reducing debt, know exactly how much you owe. A fantastic idea to keep you motivated is to do a debt-o-meter! Start with how much you owe now and tick off when bits get paid off. It’s great to see your debt visually going down!
What about your savings? Have you got a goal to get to? Where are you now. Knowing where you are and where you want to get to is key to keeping up your motivation.
I keep my figures on a spreadsheet but you can do it in a notebook, stick it to your fridge, use an app on the phone – whatever works for you.
Get alerts from your bank and check in regularly
If you are still going overdrawn every month or not managing to stick to your budget, get your bank to help you. Sign up to alerts to make sure you know when big payments have gone out. Let your bank remind you if your balance is less than a certain amount.
Checking into your bank transactions regularly can also highlight when you have done a bit of unscheduled spending. You can then adjust what you spend the next few days to make it up, or re-adjust your budget.
Checking in regularly means no nasty surprises and helps you stay in control.
Start an emergency fund
Having an emergency fund does give you a bit more invincibility. It is like the personal finance version of having a superhero power.
Boiler broke? Raid the emergency fund.
Out of work for a couple of weeks? The emergency fund got this…
Kids had a school trip you didn’t know about? Bring on the cash stash…
You can’t always know what’s round the corner, but when you have an emergency fund, it doesn’t matter.
Are you paying too much for your bills?Insurance/ Internet/ etc.
Check what you are paying for your bills and when your contracts renew.
Many people start out on great deals with contracts designed to lure in new customers. The moment those deals end, prices go up. If you’re not keeping an eye on your bills, you could go up to the default rate and end up paying double or more for the same service.
Key offenders are insurance and utilities.
Find out your credit score
For some people finding out their credit score can be a really motivating way of getting better finances.
If you have a low credit score it means you have less access to good deals for loans, credit cards or mortgages. You may not want a new credit card, but what if you are paying off an old one and want to do a balance transfer to a 0% offer? You’ve still got to have a decent credit score to get it…
Mostly the tips are things like paying your credit card or loan payments in time, making sure you’re not too close to your credit limits and closing unused accounts if you have lots of them.
If you find you have a pretty damn good credit score then well done! That’s a nice little bit of feel good factor that you can pat yourself on the back for.
Stop carrying your credit cards in your wallet
If you don’t want to spend any more on your credit cards, don’t keep them with you. I have been known to put one in the freezer before now…
It’s a small thing, but you can’t spend it if you haven’t got it.
In fact, just carry the card you need to get through the day.
Better still, try the envelope system if you want to stop overspending full stop… (see no.7)
Track your spending – try the envelope system
Tracking your spending is the single most effective way of staying on top of your finances.
It is perhaps more effort than you are used to making when it comes to money, but really how long does it take to log into your banking app on your phone? A few seconds? Then a few minutes to see what you’ve spent and see if it’s more or less than you were hoping to spend that week or day.
If you don’t want to have to keep checking up on yourself, the envelope system is another way to go.
Simply decide what you want to spend on the things you need and want e.g. groceries, nights out, clothes, stationery etc. and after payday put that money into designated envelopes.
I am currently trying this approach out and will report back when I get to the end of the month! So far it’s been a very simple reminder not to spend in nick nacks and errr coffee!
Do a budget
Do a budget. Financial plan, spending plan, whatever you want to call it.
If you already did one and it didn’t work, tweak the one you’ve got to make it more realistic.
It is essential to plan your money if you want to make it work for you.
For more help on making a budget try The Ultimate Guide to Budgeting.
Invest your money like a Wall Street Tycoon (kinda)
It feels great investing your money and you don’t have to invest a lot to feel like a money mogul.
Acorns is a micro-investing app designed to get people into investing. It rounds up your spare change from when you spend your money e.g. if you buy a $2.80 coffee it’ll round up to $3 and put the 20 cents aside – once you’ve rounded up $5 it goes into your account.
You can then invest in stocks and shares, in small increments.
Don’t ever invest what you can’t afford to lose because nothing is guaranteed in the stock market – although the beauty of micro-investing is that you are usually talking small amounts here.
Look, this isn’t going to make you a millionaire, and it certainly doesn’t replace your emergency fund or retirement planning, but it’s great fun. Anything that inspires you to get excited about your money goals is a good thing in my book.
Keep it real
A lot of money disasters happen when we are chasing a lifestyle that doesn’t match up to our income or our long term money goals.
If you are trying to pay off thousands and thousands worth of debt, taking a holiday abroad is not going to work with that goal, nor is getting a top range car.
When I was a kid in the ’80s, life was about conspicuous consumption and even today people have to have the latest tech, a new phone every year and update their wardrobes several times a year.
But the waste this produces and the expense of this type of consumption is unsustainable and ultimately is not going to make anyone happy.
Remember there is joy to be had in the simple things in life. And it’s usually a lot cheaper and simpler to live by this mantra.
Summary of how to get better finances after you’ve fallen off the wagon
So here are a few tips to help you get back on the financial fabness train. Whatever your goals are, good luck and remember just aiming high sets you above the majority of folks, so well done.
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