Everyone needs to make sure that they have a good handle on their finances. No matter whether you are earning minimum wage or you have a reasonable amount of disposable income to play with, there are going to be some techniques that you can use to manage your finances in a much more productive manner. Let’s take a look at some of the things that you can do to put yourself in a better position.
Make a Budget
One of the first things you need to do is ensure that you have a good budget in place. It does not have to be too in-depth if you do not want it to be, but you should try to have a good understanding of how this can actually benefit you. If you are able to write down a list of everything you need to account for and the amount that you have to spend each month, you will hopefully be able to cut down on some of the more frivolous purchases that you tend to make and thus making your money stretch further.
If you are going to go as in-depth as possible, you need to make sure that you account for everything. Everything from your rent or mortgage to the money that you spend on your morning coffee should be properly accounted for. Once you have a clear picture of what you are spending each month, the better the position you will be in for managing it.
A good rule to follow is the 50-30-20 rule. 50% of your income each month should be going to needs. This is your cost of living expenses and things that you absolutely cannot go without paying. 30% is for wants. This could be your Friday night takeout, or heading to the cinema with your partner to see the latest blockbuster. Finally, the last 20% should be earmarked either for savings or debts depending on where you stand here. You might have a car payment that you need to make, or you might be saving up for a laptop. Making sure that you put money aside here is incredibly important.
Of course, this ratio is arbitrary and can be moved as you need it. You might find that a 60-30-10 divide suits you better. Whatever your finances might be putting forward, you need to make sure that you are able to meet it with a plan.
Plan to Pay Off Your Debts
Most of us have debt. Whether it is a mortgage, a car to pay off, or leftovers from university loans, many of us have a debt that we need to put money towards each month. Therefore, you need to make sure that you have a plan to pay off that debt properly.
If you just let payments come out of your account without paying proper attention to them, you will run the risk of losing control of your finances and being left with no idea about how much you actually have. You need to take account of your debts and make a plan to pay them off that works for you. If you can pay a little bit more than the minimum amount each month, it might be worth assessing whether or not this is something that you will feasibly be able to do.
Remember this when implementing the 50-30-20 rule and putting it into action within your own finances. Planning how to use this rule around your own needs and debts could help you come up with a concrete and workable plan that can best benefit you. Though you might have to scrimp and save a little, it can be better to do this for a few years and then enjoy being debt-free for much longer.
Find the Right Savings Accounts
Many of us have savings accounts and they are fantastic products that allow us to put money aside for when we most need it. However, many of us are guilty of simply opting for the first savings account that we are able to find, and then not checking to see what types of rates others might have. There could be another product out there that is much better suited to your needs.
For example, there are some savings accounts that offer a good rate of interest but you are not allowed to have access to the account for withdrawals for a certain period of time. You will be able to deposit more into the account, allowing you to build up the base each month, but you cannot withdraw any of it until three years or more have passed.
This could be a fantastic option if you are not the best saver and are known for dipping into your accounts too often. If you set up a standing order to move these funds from your current account directly to your savings as soon as your salary is paid into your account, you will not even miss it.
The true advantage of saving in this way means that you get to take advantage of compound interest. Check out this compound interest guide to find out more about how this can benefit you, but it means that you could earn even more in your savings account on top of what you deposit. It is one of the key reasons why you should always watch for interest rates when choosing a savings account.
Find Cheaper Alternatives That Work for You
You need to take a good look at what you consider to be necessary in your life and then try to discover if there are cheaper alternatives elsewhere that could help you out. For example, when you buy food, are you buying raw ingredients or premade meals that you only need to heat up? The latter will always be more expensive. Learning how to cook properly can save you far more money than you ever could imagine – and there are plenty of cheap beginner recipes that you can turn to if you need a place to start!
Even the types of ingredients that you choose could make a major difference in your cost each month. For example, you could choose to get everything from one particular supermarket. However, there is another supermarket close to you that has the same ingredients at a similar quality but a much better price. There could also be a market and other local stores that you could head to where you could pick up the food that you need at a better price. In turn, all of this could be better for your finances and you could be able to free up some of your budget to put to other uses.
Remember that cheaper does not always mean a drop in quality. Many companies nowadays – especially toiletries – are beginning to offer subscription models. When you opt in to this, you will be sent a supply of their products that are designed to last you a certain amount of time. These will be at a slightly more affordable price than if you were to pay for them individually. These companies know that their clients want value and quality, so they make sure to deliver it. Choosing these options might be great in terms of budgeting, and it means that you won’t have to lower your standards when it comes to the products you choose.
Try to get in the habit of reviewing your finances at least once a month. This means that you will always have a good idea of how much you are spending in any given circumstance. A good time to do it might be when you decide to pay your bills. Setting an evening aside where you can just work on your finances properly means that you can get in touch with your financial data so you can recognise when something might be amiss.
It is not good enough to just stand idly by and spend like you have no idea how much is in your account. As an adult, it is your responsibility to ensure that you are as financially healthy as possible. Even if you are guilty of a few little spur-of-the-moment spends, you should know that they are not going to affect your finances for the month.
It is time that you took control of your finances, whatever condition they might be in. You need to sit down and work out how much you have to spend, and what you can do to improve your money management. With so many resources and tools available on the internet to help you do so successfully, there is no reason why you cannot do so.
Whether you want to clear yourself of debt, save up some money for the holiday of your dreams, or even look into something like stocks trading, there is always going to be something you can do to improve your finances. Take a look at how they currently stand, and begin to make plans that can help you now.